Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Oral Answers to Questions — WALES

Nursery Education

Mr. Coleman: asked the Secretary of State for Wales what proposals he has to introduce a scheme that funds projects for children under five years of age similar to that existing in England; and if he will make a statement.

The Parliamentary Under-Secretary of State for Wales (Mr. Wyn Roberts): We have been considering what further steps might be taken to help with the under-fives in Wales. We shall shortly be consulting representatives from relevant statutory authorities and voluntary organisations about the precise range of need and the best means of meeting it.

Mr. Coleman: I am grateful to the hon. Gentleman for that reply, but is he aware of the complaints from the voluntary societies and, in particular, from the Children's Society to the effect that the absence of such a scheme in Wales is impeding their work especially among one-parent families? Will he discuss with the Secretary of State for Social Services the speedy implementation of that scheme in Wales?

Mr. Roberts: We are certainly aware of the desire that has been expressed by hon. Members, among others, for

such a scheme. However, I hope that the hon. Gentleman will bear in mind that we do not always slavishly follow in the wake of England. Indeed, neither do the Scots nor the Northern Irish. We have our own priorities. Nevertheless, we shall be consulting many of the bodies involved with small children.

Mr. D. E. Thomas: The Parliamentary Under-Secretary of State has just said that the Welsh Office has its own priorities, but is he aware that the joint initiative on the under-fives should be a priority for every territorial Department in Britain, given that this is the area in which young children are most clearly open to deprivation? Will the Minister now ensure that Wales follows the lead given progressively by England?

Mr. Roberts: By "our own priorities" I was, of course, referring to our mental handicap intitiative and to that on perinatal mortality, for example. However, the further consultations that we are undertaking will give us a guide as to the resources required for this initiative. I am happy to say that up to £100,000 a year in the next three years can be made available, if necessary.

Social Service Complex (Colwyn Bay)

Sir Anthony Meyer: asked the Secretary of State for Wales what approaches he has received from Clwyd area health authority regarding the joint financing of a social service complex for the elderly at Colwyn bay; and what reply he has made.

Mr. Wyn Roberts: I announced last month Welsh Office allocations of over £1·1 million for jointly financed and NHS mental health developments in 1984–85. These will support schemes to benefit mentally ill, mentally handicapped and elderly people throughout Wales. The allocation of £180,000 to the Clwyd health authority included an offer of support for the community development for elderly people in Colwyn bay to which my hon. Friend referred.

Sir Anthony Meyer: I am grateful to my hon. Friend for that reply. Is he aware of the risk that the project might fall down because of the inability of the area health


authority to match the contribution that is required? Will my hon. Friend use his good offices to ensure that the scheme comes to fruition?

Mr. Roberts: Of course, it is up to the health authority to match our offer in such a scheme. However, I understand that the health authority views the Colwyn bay project favourably.

Dairy Farmers

Mr. Geraint Howells: asked the Secretary of State for Wales what further plans he has to help dairy farmers in Wales; and if he will make a statement.

The Secretary of State for Wales (Mr. Nicholas Edwards): The Welsh Office, through the resources of the Agriculture Development and Advisory Service in Wales, will do everything possible to help producers reach decisions on how best to conduct their business during this difficult period of adjustment. All milk producers have already been sent a copy of a note prepared by ADAS which offers preliminary advice on coping with the quota.

Mr. Howells: Does the right hon. Gentleman agree that he made a political blunder and neglected his duties in not going to Brussels to look after the interests of Welsh dairy farmers? Will he now consider paying compensation to those who, through Government proposals, have lost their business?

Mr. Edwards: I do not accept that. I am certain that it is sensible for negotiations with 10 countries in Europe to be conducted on behalf of Britain by one Minister who has fully considered the various interests of different parts of the United Kingdom in the detailed discussions that take place at every stage of our consideration of the issues.

Mr. Hooson: Does my right hon. Friend agree that achieving, for instance, the doubling of the suckler cow premium, the retention against all odds of the beef variable premium and the extension of the less-favoured area definition from 57 to 80 per cent. of Welsh farmland is good news for Welsh livestock farmers?

Mr. Edwards: That is correct. We succeeded in the European negotiations in achieving many of the most important objectives which were spelt out to us by the farmers' unions. Not least, we avoided the revaluation of the green pound.

Dr. Roger Thomas: What defence does the Minister have for the agreement which is driving farmers to pour milk down the drain rather than take it to the creameries so that they do not have to face such a substantial financial debacle?

Mr. Edwards: The defence is that at present surpluses in Europe are costing European taxpayers about £3 billion. The policy of the hon. Gentleman's party is drastically to reduce expenditure on the CAP. I cannot take his protests seriously when action is being taken to reform the CAP and reduce expenditure on what members of his party have previously described as an obscenity.

Mr. Wigley: Were not many farmers advised professionally to produce more milk in the last two or three years? Is it not a travesty that between 30,000 and 40,000 cows may have to be slaughtered to meet the terms of the policy? Does the Secretary of State intend to help farmers

in Wales by using article 4 of the agreement made on 31 March, which provides for a one-off grant, or an annual grant to assist farmers to change from producing milk?

Mr. Edwards: Successive Ministers of Agriculture have argued for a reform of the arrangements for milk support in the Community. In the absence of an agreement on that, in recent years it would have been extraordinary for British Ministers to tell farmers that they should not take full advantage of the arrangements that apply to the rest of Europe. If we had done that we should have started to cut back from a much lower base and our relative position and self-sufficiency would have been much less satisfactory than it is. I do not apologise for encouraging farmers to take advantage of the European arrangements. We have now reached an agreement on a measure to cut surpluses. I have nothing to announce at present on the line suggested.

Mr. Barry Jones: Will the right hon. Gentleman acknowledge that the Government's craven efforts have put many hundreds of Welsh dairy farmers at risk of bankruptcy or serious hardship? Will he concede that the Government have betrayed the Welsh dairy farmers in order to advance towards something like an EEC budget? Does he agree that he has put the whole of the Welsh rural economy at risk?

Mr. Edwards: Many individual farmers will face real difficulties, but I am not sure whether the hon. Gentleman, of all people, is in a strong position to lecture the House on the subject, since his Front Bench argues that we have done insufficient to cut expenditure on the CAP.

Housing

Mr. Anderson: asked the Secretary of State for Wales whether he has now received copies of the reports on housing in the Principality by the Association of Directors of Housing and the housing associations; and what response he intends to make.

Mr. Wyn Roberts: I received a copy of the report some days after it was made available to HTV and the press. The issues it raised have been discussed in the House on many occasions and I see no need for any formal response.

Mr. Anderson: What a dismissive way to try to get rid of reports which clearly show the universal condemnation of Welsh Office policies by those in the front line. I refer not only to the two reports about which I asked, but to the leaked Welsh Office advisory report. Why did the Welsh Office, in response to the universal call for a housing strategy for the Principality, say that it was naive for such a strategy to be demanded? Was the use of the word "naive" approved? If it was, does that not show complete complacency about the magnitude of housing problems in Wales?

Mr. Roberts: I can assure the hon. Gentleman that I am not complacent. I am fully aware of housing problems in Wales. The report is entitled "Report on the capital investment in housing in Wales". I find it inadequate on that score. It grossly understates what is being spent on housing. It quotes authorities' capital expenditure on a net basis and omits the substantial input from capital receipts in recent years. The report also ignores the valuable contribution being made by the Housing Corporation and


fails to recognise the significance of urban development grant. The authors are clearly not fully aware of what capital investment there is in housing in Wales.

Mr. Hubbard-Miles: Does my hon. Friend agree that in the years 1980–81 and 1981–82 there was considerable underspending of the capital uptake by local housing authorities, amounting to something over £80 million in the two years?

Mr. Roberts: My hon. Friend is right. In 1981–82 we provided for expenditure of some £31 per head on housing in Wales compared with £32 per head in England, but in Wales £22 per head was spent as opposed to £32 per head in England—about 50 per cent. more.

Mr. Wigley: Will the Minister tell the House whether he intends to publish "The production of a housing plan for Wales", the document produced by the housing management advisory panel for Wales in September last, which he has kept hidden until now and which is a devastating indictment of the Government's failure to come to grips with the problem? Will he now produce a plan and set up a working party as recommended in the document?

Mr. Roberts: There is nothing secret about the document to which the hon. Gentleman refers. In fact, I discussed it with the Welsh housing consultative committee on 2 December last year. Its main thrust was to get the Welsh Office to fund a research programme costing some £83,000 upon which a housing plan for Wales might be based. I did not believe that the research was necessary—we have all the facts—nor do I think that the local authorities would agree a plan because of their widely differing circumstances, requirements and policy objectives. If the local authorities feel differently, of course they are welcome to fund the research which, as I say, is estimated to cost £83,000.

Mr. Mark Robinson: Will my hon. Friend confirm that private house building starts in Wales are up some 40 per cent. since 1981? Does that not show that the Government's policies are having an effect on Welsh housing, contrary to what we hear from the Opposition?

Mr. Roberts: Of course, my hon. Friend is right as regards the private sector. It is curious that in this exchange we have not, as yet, mentioned the Government's strategy on the rehabilitation of houses in Wales. The extent of that rehabilitation is illustrated by the fact that last year alone some £102 million was spent on grants compared with only £58 million over the Labour Administration's last five years. That is our strategy for Wales.

Mr. Barry Jones: With thousands of homeless Welsh people and tens of thousands of construction workers in Wales on the dole, why did the Minister decide to cut local authority building allocation by some 20 per cent.? Is it not foolish and cruel to limit the capability of housing associations this year to about only one sixth of what they could do? Is he not that aware that this policy and that of his Department for housing in Wales is a national disgrace?

Mr. Roberts: There is a considerable amount of housing activity in Wales. I have already stressed that the Government's emphasis is on the rehabilitation of older properties. That has been demanded time and again by Opposition Members. I am delighted to say that between

April 1982 and December 1983 we have had 121,000 applications for improvement grants, of which 29,000 have been completed and 28,000 have been approved. By my calculation we are about half way towards achieving what we require.

Local Community Hospitals

Mr. Wigley: asked the Secretary of State for Wales if he will review health policy in Wales to ensure that local community hospitals are not adversely affected by the centralisation of financial resources into the district general hospitals.

Mr. Wyn Roberts: Health policy is always kept under review, but it is not our policy to centralise resources into the district general hospitals.

Mr. Wigley: Will the Minister accept that that is happening, whatever the policy may be? Is he aware that throughout Wales we are hearing the same complaint? For example, is he aware that in Aberdare last week I was told that the general hospital was losing facilities to Prince Charles' hospital in Merthyr, and that last weekend in Caernarfon a similar complaint was made to me about the Eryri hospital losing X-ray facilities to the new district general hospital at Bangor? If the Minister is not aware of these problems, it is high time that he opened his eyes and did something about them.

Mr. Roberts: I am sure that the hon. Gentleman does not wish to discourage us from going ahead with the tremendously impressive new district general hospitals that we are building throughout Wales, because he knows that they are the focal point of the provision of specialised and acute services. Our district general hospitals are intended to consolidate, and provide more efficiently, those services that may have been found previously in smaller hospitals. It is a matter for the health authority to consider whether the smaller hospitals can be put to an alternative use or should be disposed of.

Mr. Raffan: My hon. Friend will be aware that the Clwyd area health authority has now agreed to keep open Chatsworth house hospital, Prestatyn, with 12 GP general medical beds. When this proposal comes before my hon. Friend, may I ask him to give serious consideration to the counter-proposals of the hospital's action committee, which would add GP maternity beds, an ante-natal clinic and combined district nurse and midwifery facility—proposals that make far more economic and practical sense than those of the health authority?

Mr. Roberts: My right hon. Friend will give careful consideration to any representations that are made to him on this issue.

Dr. Roger Thomas: May we be reassured that the specialty of geriatrics will be continued at our district general hospitals and will not be relegated into the shadows of our community hospitals?

Mr. Roberts: As the hon. Gentleman, of all people, should know, we are most concerned with the elderly, just as we are concerned with the mentally ill and mentally handicapped. We have always urged health authorities and local authorities to give them their close attention.

European Regional Development Fund

Mr. Mark Robinson: asked the Secretary of State for Wales how much European regional development fund aid committed to Wales to date has been devoted to (a) infrastructural projects and (b) industrial projects.

Mr. Nicholas Edwards: The figures are £140·8 million and £68·8 million respectively under the quota section of the fund. In addition, about £10·5 million in total has been committed to a programme of special measures to improve infrastructure and assistance to small firms in steel areas under the non-quota section of the fund.

Mr. Robinson: Does my right hon. Friend agree that these figures demonstrate the value of the ERDF in terms of jobs and employment in Wales? Will he comment on the recent policy document of Plaid Cymru, which suggested that the ERDF had no value to Wales?

Mr. Edwards: I agree about the importance of the grants, and the total is even more impressive when one considers the £1,216 million in identifiable grants and loans from all European Community sources. I read the Plaid Cymru policy document and found it naive and astonishing in its proposals. I wondered whether the people employed, for example, at the Dinorwic power station scheme entirely dismissed the valuable aid that that scheme received from the Community.

Mr. Barry Jones: If the right hon. Gentleman truly believes in excellent regional infrastructure, why does he not increase the budget of the Welsh Development Agency and particularly of the derelict land sector? If he really believes in regional infrastucture, why is he so laggardly and quiet about the need urgently to start on the second crossing of the Severn? Has he anything yet to say about the feasibility study?

Mr. Edwards: It is absurd to say that we are being laggardly on infrastucture, when this Government have carried out the greatest programme of infrastructure improvement ever undertaken in the Principality, including a massive road programme, which apparently Plaid Cymru in its policy document dismisses and does not want.
I understand that the Department of Transport is likely to make a further statement on the Severn bridge feasibility study in the next week or so.

Mr. Wigley: In view of the attacks that the Secretary of State feels, for whatever reason, that it is necessary to make this week on Plaid Cymru, will he clarify why only 1 per cent. of the money that comes from the European regional development fund for industrial development in Wales goes to Gwynedd and why the Government persist in refusing to apply the principle of additionality in respect of that money? They take in money from the European Community and subsume it into the Treasury instead of passing it on to Wales.

Mr. Edwards: The fact that these substantial sums have been received enables us to spend a great deal more in Wales that we otherwise could. The local authorities who use the funds know that they reduce their borrowing requirements, which is why they welcome them. It is perhaps a pity that over the years the Gwynedd council has

not come forward with more schemes of a sort that are likely to receive support. Perhaps the hon. Gentleman should address his questions to that authority.

Housing

Mr. Roy Hughes: asked the Secretary of State for Wales what percentage of total capital expenditure in Wales was spent on housing at the latest available date; and how this compares with the percentage figure so spent in 1979.

Mr. Wyn Roberts: Gross capital expenditure on housing in Wales in 1983–84 is estimated at about 34 per cent. of the total gross capital expenditure which lies within my right hon. Friend's responsibility. The comparable figure for 1979–80 was 31 per cent.

Mr. Hughes: I again draw the Minister's attention to the chief housing officer's report. Bearing in mind that he and his colleagues are the experts on housing, does the Minister deny that total expenditure allocated to housing has dropped by two thirds in the past six years, and that even in the private sector the number of houses completed has dropped by more than 30 per cent. since 1979? What is the Welsh Office doing to arrest the appalling decline that is developing in Welsh housing?

Mr. Roberts: I think that the report was referring to the private sector when it drew attention to the events of the past six years. It is right to say that there has been an upswing in private sector house building. Starts in 1983 were 40 per cent. up on those in 1981 and we hope that trend will continue. In the coming year the local authorities will have about £150 million to spend on housing, and the Housing Corporation will be able to spend a further £41·5 million. With the expenditure of the Development Board for Rural Wales on housing and urban development grant pump-priming finance, I expect public sector capital investment in housing this financial year to be close to £200 million.

Mr. Raffan: Does my hon. Friend agree that Labour Members' feeble attacks on the Government's housing record come hypocritically from a party which showed such scant regard for home improvement when it formed the Government? Will he remind Labour Members yet again of their appalling record on improvement grants? Is he aware that the figures show that over five years the Labour Government spent little more than half of what this Government have spent in only one year?

Mr. Roberts: My hon. Friend is right. During the five years from 1974–75 to 1978–79 the previous Labour Government spent £58 million on home improvement. That must be set against the £100 million which the present Government spent last year alone. I should remind Labour Members, too, that when the Labour Government were in office public sector house building fell by 60 per cent.

Housing Associations

Mr. D. E. Thomas: asked the Secretary of State for Wales what proportion of total public expenditure in Wales on housing was allocated to housing associations in each year since 1979.

Mr. Wyn Roberts: The proportions are as follows: 1979–80, 9 per cent.; 1980–81, 10 per cent.; 1981–82, 14 per cent.; 1982–83, 19 per cent.; 1983–84, 15 per cent.; 1984–85, 18 per cent.

Mr. Thomas: Will the Minister confirm that the capacity of the housing association movement in Wales is about 6,000 units and that the reality is that on that level of funding the movement will be able to achieve 500 new builds and only about 1,000 rehabilitations? How does that accord with the Government's rehabilitation priorities?

Mr. Roberts: The hon. Gentleman will be aware of the considerable increase in spending by housing associations through the Housing Corporation over the years that I have mentioned. He is right in saying that in the current year the associations will build about 560 new houses and rehabilitate about 1,170 units. I dare say that they could do more and wanted to do more. However, the Government are firmly committed to restraining and reducting inflation, and it is vital that we should continue with reductions in public expenditure.

Mr. Roy Hughes: Does the hon. Gentleman agree that the housing associations provide a useful addition to public and private housing provision? If so, why are they being starved of funds by the Government? Are the Government more interested in providing Trident missiles, which could blow us all to smithereens, or in costly ventures in the Falkland Islands?

Mr. Roberts: I have just told the House that the allocation to the housing associations increased considerably during those years. The figure for 1979–80 was £20 million. This year the figure is £39·7 million. The addition of capital receipts means that the figure will increase to £41·5 million. The housing associations make a valuable contribution to the housing stock in Wales. We appreciate their contribution, because they cater for those with special housing needs.

Labour Statistics

Mr. Barry Jones: asked the Secretary of State for Wales how many people are unemployed (unadjusted and inclusive of school leavers); how many were unemployed in May 1979; and by what percentage unemployment has increased since May 1979.

Mr. Nicholas Edwards: In April 1984 there were 169,630 unemployed claimants in Wales. In May 1979 the estimated number of claimants was 77,177—an increase of 119·8 per cent.

Mr. Jones: Against the background of those grave and distressing figures, will the Secretary of State take this opportunity to tell the people of Deeside, 8,100 of whom are out of work, why the Nissan project was not located on Deeside, notwithstanding the fine efforts of the local authorities and trade unions to bring the project to Deeside, and other campaigns that sought to bring it to Wales? Will the right hon. Gentleman tell the House that he would rather resign than see the Llanwern steelworks close? Bearing in mind that the Government are working on steel privatisation plans, is the right hon. Gentleman prepared to say which plants in Wales the Government are thinking of privatising?

Mr. Edwards: I do not believe, Mr. Speaker, that you will allow me to answer all those questions.
The Nissan company has not spelt out precisely why it chose a particular site. I believe that, after having been well out of consideration, the Shotton site made it a closerun race. I am sure the hon. Gentleman will agree that that was because of the efforts made not only by the local authorities and trade unions but by my Department., the Welsh Development Agency, WlNvest and everyone else involved. We have established that Shotton is a first-class site.
I know of no threat to Llanwern, although, because of a strike that seems to be supported by the hon. Gentleman, it will not receive the coal it needs.

Sir Anthony Meyer: Does my right hon. Friend agree that the likeliest contribution to providing more jobs in Wales is the certainty of Britain remaining in the EEC? What contribution has the hon. Member for Alyn and Deeside (Mr. Jones) made? He was against the EEC in 1963, for it in 1967, sat on the fence in 1975, was against the EEC in 1979 and is back on the fence again in 1984.

Mr. Edwards: If find it surprising that my hon. Friend can even discover where the hon. Member for Alyn and Deeside (Mr. Jones) stands on any matter. Last year was a record year for inward investment in the United Kingdom, and Wales obtained well over 20 per cent. of that investment. That occurred largely because of our membership of the European Community.

Mr. Foot: In view of the terrible figures announced by the Secretary of State, will he respond to the repeated demands of the Opposition that more money should be allocated to the Welsh Development Agency? Has he in the past month been to the Treasury to demand those resources?

Mr. Edwards: No, I have not. We have had, yet again, another quarter in which there has been an all-time record allocation of Government factory space in Wales. The figures for selective financial assistance applications and resulting jobs are again at an all-time high and show that the recovery of the economy is strongly under way. I am sure the right hon. Gentleman welcomes the fact that, during the past 12 months unemployment has decreased. There are signs that the recovery is spreading far more widely through the economy.

Mr. Gwilym Jones: Does my right hon. Friend agree that wild demagoguery and irresponsible statements by the NUM officials both in and visiting south Wales are likely to have a most negative effect on all the excellent efforts to bring additional employment to the area?

Mr. Edwards: Industrial disputes of any kind can only damage future job prospects for the areas concerned.

Mr. Geraint Howells: Is the Secretary of State aware that unemployment in the Teifi valley between Cardigan and Lampeter has been more than 20 per cent. for the past 10 years? What plans does he have to try to solve that problem?

Mr. Edwards: I am, of course, aware of the rural unemployment in that part of Wales. As the hon. Gentleman knows, we have given considerable support to the Development Board for Rural Wales in its efforts, which are having a great deal of success, to bring new jobs to mid-Wales.

Mr. Anderson: Will the Secretary of State put his hand on his heart and tell the House whether he has any


confidence that, if present policies continue, the unprecedentedly high unemployment figures will be reduced?

Mr. Edwards: I have great confidence that there will continue to be a flow of new industries with growth prospects for Wales, which is the best prospect for a reduction in unemployment. Last year there was an increase in the number of people in employment in the United Kingdom. That is an encouraging trend, as is the increased number of people employed in the service industries throughout the United Kingdom. We believe that those trends are broadly followed in Wales, although the regional breakdown is not yet available.

Mr. D. E. Thomas: How will the Manpower Services Commission's proposals for the closure of some jobcentres and the withdrawal of advisory services from others help the unemployed claimants of Wales?

Mr. Edwards: The hon. Gentleman refers to proposals put by the MSC management to its board for an extension and enlargement of its jobcentre programme and for the modernisation of many jobcentres to make them more available and more efficient. I understand that the board has now decided to consider those proposals further and to undertake certain experimental schemes. It is clearly for the MSC to take those proposals forward.

Welsh Assembly

Mr. Hooson: asked the Secretary of State for Wales how many representations he has received regarding a Welsh assembly in the past year.

Mr. Nicholas Edwards: None, Sir.

Mr. Hooson: Does not that information like the 1979 referendum, confirm that the people of Wales see no need for a Welsh Assembly? That being so, is it not astonishing that the Leader of the Opposition, who once opposed such an Assembly, has now somersaulted and is advocating two such bodies for Wales?

Mr. Edwards: I find it surprising that the Leader of the Opposition, having spent many hours in alliance with me opposing the Labour Government's devolution proposals, should now make proposals which inculude establishing a north Wales regional assembly apparently to supervise the two county authorities there. It is indeed a most extraordinary proposal.

Mr. D. E. Thomas: Does the Secretary of State accept that if there is a strong vote for parties which support democracy in Wales in the forthcoming Aberdare by-election and the vote obtained by the Conservatives is derisory, the Government should take note of that?

Mr. Edwards: I hope that the hon. Gentleman has taken note of the results of the last general election and its disastrous consequences for Plaid Cymru, which was dismissed with contempt by the electorate in Wales on a scale not known for many years.

Mr. Geraint Howells: Does the Secretary of State agree that although the Labour Government's proposals for devolution were rejected in 1979, the principle of devolving power to the people of Wales was not?

Mr. Edwards: I would take suggestions from the hon. Gentleman more seriously if I were not aware of the recent

debate among Liberals as to the kinds of proposals that they might now consider. I noted, however, that, as a result of the activities of one of the hon. Gentleman's parliamentary colleagues, they at least had the good sense to throw out the suggestion that there should be a large number of nominated members, apparently to be nominated by Lord Hooson.

Voluntary Organisations

Mr. Knox: asked the Secretary of State for Wales how much will be given in grants to voluntary organisations by his Department during the current financial year.

Mr. Wyn Roberts: The total provision for 1984–85 is £8·7 million. However, although grants have already been offered to some organisations, others are still under consideration. It is therefore too early to say what will be the total amount paid in grants during the financial year.

Mr. Knox: What is my hon. Friend's general policy towards the voluntary sector and, in particular, the mental handicap strategy?

Mr. Roberts: We are fully committed to the development of a healthy and vigorous voluntary sector working in partnership with the statutory services. The voluntary sector has an important part to play in connection with the mental handicap strategy. In addition to providing £445,000 for specific voluntary projects in connection with the strategy in 1984–85, we are providing a further grant of £22,575 for essential administrative support for the all-Wales standing conference of voluntary organisations involved in the strategy.

CHURCH COMMISSIONERS

Redundant Churches

Mr. Chapman: asked the hon. Member for Wokingham, as representing the Church Commissioners, what are the number of redundant Anglican churches put to use for worship by other religions, put to secular uses, and demolished, respectively, since the Pastoral Measure came into operation 15 years ago.

The Second Church Estates Commissioner (Sir William van Straubenzee): The numbers are 1,438 and 249, respectively.

Mr. Chapman: I realise that those figures do not include Anglican buildings which have passed to other Christian churches. Could my hon. Friend provide that figure? Do not those figures show that relatively few Anglican churches have in fact been demolished, and is that not a commendable state of affairs? Do the Church Commissioners feel that they will be able to maintain that commendable record if VAT is extended to building alterations?

Sir William van Straubenzee: The number of redundant churches now used for worship by other Christian bodies is 68. Only 26 per cent. of the churches which have become redundant since 1969 have been demolished.
The third point, which is not connected with the question of demolition, is a matter of concern to the Church as a whole — indeed, all churches.
Representations are being co-ordinated by the Churches main committee, which acts for all the Christian churches in this country.

Sir John Biggs-Davison: Many of us fully support the efforts of the Churches main committee. Are not many more churches likely to be demolished if the Finance Bill is not appropriately amended?

Sir William van Straubenzee: I can answer only for the Church Commissioners. It is difficult to say what the financial effect would be on them. The estimate for the Church of England as a whole is about £5 million, which is a substantial sum. That is why representations are being made to my right hon. Friend the Chancellor of the Exchequer to ensure that he bears all aspects of the matter in mind.

Mr. Beith: Is not the most damaging feature of the proposals that have been mentioned the fact that demolition becomes the more attractive alternative to bodies which might seek to continue to use a church as a place of worship and to bodies which might wish to take over a church for alternative uses? Is that not a matter on which the representations of the Church Commissioners and other churches are extremely important?

Sir William van Straubenzee: I am sure that the hon. Gentleman has seen the letter in the press from the First Church Estates Commissioner. In Church, as in other matters, it is often difficult to set the dividing line between those activities which are subject to VAT and those which are not. Everyone understands the advantage of removing that uncertainty. No one would deny, however, that the total cost of the proposals to the churches is substantial.

Mrs. Kellett-Bowman: If the churches are adversely affected by VAT, will not the closely related church schools also be placed at a disadvantage?

Sir William van Straubenzee: The churches have a responsibility in that area, but the Church Commissioners do not. I know that my hon. Friend will forgive me when I say that I have to be careful not to stray beyond the responsibilities of the Church Commissioners. If I do, I shall find myself answering far wider questions than is healthy.

Mr. Peter Bruinvels: Will my hon. Friend congratulate the Church Commissioners on demolishing so few churches? In Leicester, for example, old churches are highly valued, even if they are converted into temples or mosques for the Moslem community. Does my hon. Friend agree that that is preferable to demolishing any more churches?

Sir William van Straubenee: I have often tried to emphasise that the Church Commissioners' first thought in all such cases is alternative use rather than demolition. I know that my hon. Friend follows these matters closely, but he should know that only one church has been allocated for worship by a non-Christian body. No other case is before the Commissioners at the moment. If any were to arise, it would be judged strictly on its merits.

WALES

Coal Industry

Mr. Raffan: asked the Secretary of State for Wales if, when he next meets the National Coal Board's area director for Wales, he will discuss the effects of the current miners dispute on the future of the coal industry in Wales.

Mr. Nicholas Edwards: I and my Department are keeping closely in touch with the National Coal Board's directors about all aspects of the coal industry, including the effects of the current dispute.

Mr. Raffan: Has my right hon. Friend read the recent remarks of the area director for south Wales, Mr. Philip Weekes, to the effect that the strike is now adding £2 million a week to the losses of the south Wales coalfield and that he is extremely anxious that the coalfield will lose customers because it is no longer a consistent and reliable supplier? Does my right hon. Friend agree that the only way in which the miners of south Wales can secure their future is to ignore the political mischief-making of Mr. Scargill and the Labour party and to follow the excellent example of the miners at Point of Ayr in my constituency and return to work?

Mr. Edwards: I am sure that the future of the coal mining industry, which is receiving massive investment from the Government, cannot be helped by increased losses, safety measures being put at risk and markets being endangered. I entirely agree with my hon. Friend

Mr. Speaker: Questions to the Parliamentary Under-Secretary of State with responsibility for the Arts.

Mr. Flannery: No. 20, Sir.

Mr. Speaker: Order. I have gone too quickly. Mr. Coleman.

Mr. Coleman: Despite the obvious pleasure of Conservative Members at the miners' strike bringing hardship to mining communities, will the Secretary of State confirm that miners who go on strike, and their families, are entitled to receive exemption when requiring prescriptions if they notify DHSS offices?

Mr. Edwards: I should have preferred to have notice of that question. I shall write to the hon. Gentleman about it.

Mr. Barry Jones: When will the Government adopt a statesmanlike approach and intervene and encourage conciliation in the dispute? Why should the miners agree to pit closures when, in the south Wales valleys, male unemployment exceeds 20 per cent., and since 1979, under the Conservative Government, nearly 100,000 Welsh manufacturing jobs have disappeared? Should the closures go ahead, where will the new jobs come from?

Mr. Edwards: The Government have invested some £3·8 billion in the coal industry, compared with less than £1·5 billion by the previous Labour Government. We are planning to invest £3 billion over the next four years, and capital investment is being made at a rate of £2 million a day. I note that the hon. Gentleman referred to conciliation. Yet the Labour party is apparently allying itself with Mr. Scargill to obtain social and political objectives which Mr. Scargill is unwilling to put to a ballot of his own members.

Pupil-teacher Ratios

Mr. Hubbard-Miles: asked the Secretary of State for Wales what is the latest pupil-teacher ratio available for maintained secondary schools in Wales.

The Minister of State, Welsh Office (Mr. John Stradling Thomas): The ratio was 16·5:1 in January 1983.

Mr. Hubbard-Miles: I thank my hon. Friend for that reply. Does he agree that those excellent figures make nonsense of the wildly exaggerated allegations of cuts in the education service? Does he further agree that those figures, with the impending fall in pupil numbers in the secondary sector, should encourage local education authorities to plan to take advantage of falling school rolls and to deal with any problems that they might encounter?

Mr. Stradling Thomas: I agree with my hon. Friend. The pupil-teacher ratio has improved since we took office — 16·5:1 is the best yet achieved. Of course, the figures contradict claims that Government policy has harmed education in Wales. I urge local education authorities to make the best possible use of their resources in those circumstances.

EC (Loans and Grants)

Mr. Grist: asked the Secretary of State for Wales what has been the total number and value of (a) loans and (b) grants made to private and public businesses and authorities in Wales under the terms of the treaties of Rome and of Paris since the United Kingdom's accession to the European Economic Community.

Mr. Nicholas Edwards: The total value in terms of financial assistance from the European Community is £736 million in loans and £480 million in grants. Because of the diverse nature of the various loan and grant schemes, it is not possible to give an accurate figure of the total number of individual loans and grants involved.

Mr. Grist: Does my right hon. Friend agree that those figures and the figures for all the other loans and grants in connection with the development fund, which he mentioned this afternoon, should be widely known in Wales, not least by MEPs who represent Welsh seats for the Labour party?

Mr. Edwards: They are probably aware of them. It is extraordinary that they should repeatedly urge further expenditure on infrastructure in Wales, and yet be less than enthusiastic about our membership of the Community which supports many of those schemes.

THE ARTS

Arts Council

Mr. Flannery: asked the Parliamentary Under-Secretary of State answering in respect of the Arts if the Minister for the Arts has received any critical representations in regard to the recent report of the Arts Council; and if he will make a statement.

The Parliamentary Under-Secretary of State for the Environment (Mr. William Waldegrave): My noble Friend has received some representations about the

position of individual bodies, but he is glad that in general the Arts Council's review of its priorities has been well received.

Mr. Flannery: The Minister has not answered my question. How many "critical representations" have been made? It is obvious to all hon. Members that there is deep feeling about the so-called "The Glory of the Garden" report, the name of which is a quotation from Rudyard Kipling. Have not many critical representations been made to the press? Will the Minister tell the House how many critical representations have been made and whether he has had any discussions with the Arts Council since the report was published?

Mr. Waldegrave: My noble Friend received 15 critical letters, 12 of which were about the Gateway theatre, Chester. The hon. Gentleman's account of the reception of the report by the press is unfair. If he reads the leaders in The Times, the Financial Times, and The Sunday Times—Bernard Levin's articles and others—he will see that the report was on the whole welcomed as challenging and interesting.

Mr. Sims: Will my hon. Friend invite the Arts Council to reconsider the criteria on which it issues grants to theatres? Is he aware that the Churchill theatre in Bromley — which is one of the best-designed theatres — has established a reputation for well-produced plays which attract large audiences, and yet is being rewarded for its efforts by losing its Arts Council grant?

Mr. Waldegrave: Individual institutions should make representations direct to the Arts Council, not to my noble Friend or myself.

Mr. Fisher: Does the Parliamentary Under-Secretary accept the criticism that of the £5·5 million grants reallocated, over £3 million is being reallocated from regional companies or projects? Does that not demolish the Minister's claim that "gardening" helps the regions? It manifestly does not.

Mr. Waldegrave: With respect, the hon. Gentleman is wrong. When we look at the development of the Arts Council's policy, as outlined over the next few years, we shall see that part of Maynard Keynes' original intention —to spread the arts through the regions—is being undertaken seriously for the first time.

Mr. Grist: Does my hon. Friend seriously consider that major London orchestras will wish to go to the east midlands or to disband?

Mr. Waldegrave: The Arts Council must negotiate that with the orchestras. The move to establish an orchestra in the east midlands was widely welcomed.

Mr. Buchan: As the regionalisation policy—which is phoney—is based on the assumption that arts will receive matching funds from local authorities, how on earth can they get those funds when the Government are cutting and capping funds and abolishing local authorities?

Mr. Waldegrave: The policy is not based solely on that. It is based on a reallocation of Arts Council resources. The Arts Council believes that local authorities will continue to fund the arts, and I have no doubt that they will.

Mr. Murphy: asked the Parliamentary Under-Secretary of State answering in respect of the Arts if he will make a statement on the recent Arts Council review.

Mr. Waldegrave: I refer my hon. Friend to the answer I have just given to the hon. Member for Sheffield, Hillsborough (Mr. Flannery).

Mr. Murphy: Does my hon. Friend believe, following representations that have been made, that adequate assessment of the role of private sponsorship was considered by the council?

Mr. Waldegrave: I agree with the implication of my hon. Friend's question. Sponsorship is an extremely important and slowly growing area. I shall draw my hon. Friend's point to the attention of my noble Friend.

Business and Private Support

Mr. Chapman: asked the Parliamentary Under-Secretary of State answering in respect of the Arts what is the current estimated level of business sponsorship and private support for the arts as a proportion of Government funding; and how this has changed over the past five years.

Mr. Waldegrave: In the past five years business sponsorship has increased from 1 to 2 per cent. of total Government support for arts and libraries. No figures are available for the extent of private support.

Mr. Chapman: I appreciate that the amount as well as the proportion is important, but is my hon. Friend satisfied with that proportion? Will he assure the House that he is in constant touch with my right hon. Friend the Chancellor of the Exchequer to ensure that the tax regime is as favourable as possible for business and private sponsorship of the arts? Is that not the way to improve that rather small percentage?

Mr. Waldegrave: I agree with my hon. Friend that it is not enough, and I am sure that my noble Friend would also agree with that. Equally, the generous tax concessions, such as four-year covenants, that are available are not fully understood. The small percentage is in some ways misleading, because in some areas private sponsorship is much more important than the figures would lead one to believe.

Mr. Freud: rose—

Mr. Speaker: Mr. Freud, to ask question 24.

Mr. Freud: I was rising to ask a supplementary to question 23, Sir.

Mr. Speaker: I have called question 24.

Arts Associations

Mr. Freud: asked the Parliamentary Under-Secretary of State answering in respect of the Arts what is the per capita grant for each of the English regional arts associations.

Mr. Waldegrave: With permission, Mr. Speaker, I shall place a list of grants by the Arts Council of Great Britain in the Library.

Mr. Speaker: Order. If the hon. Member for Cambridgeshire, North-East (Mr. Freud) is ingenious, I am sure that he will get in his supplementary question.

Mr. Freud: Had I been ingenious, I should have asked the Minister whether, having answered the question from

the hon. Member for Chipping Barnett (Mr. Chapman), he would wish to revise his answer to the hon. Member for Welwyn Hatfield (Mr. Murphy).
In respect of question 24, as there has been a new application of fertiliser across the garden of the theatre, does the Minister now realise that the concept of financial distribution to regional arts authorities is wrong in that it takes no account of growth, demographic movement or regional trends? Might this not be a good time to start again?

Mr. Waldegrave: In one sense the Arts Council is starting again. The hon. Gentleman is right to say that the criteria that he mentioned were not used in the past. Money that has gone to support individual activities that are judged to be valuable has riot depended on the population or other criteria. Now that the Arts Council is moving into a new area, with more resources in the regions, I have no doubt that it will wish to consider such suggestions.

Mr. Buchan: As the Government intervened, before the Arts Council grants were made known, to earmark some funds for centres of excellence, especially in London, they thereby cut the total amount available, including the amount for the regions. Does that not mean that for the entire arts, except for the four centres of excellence, there has been a cut in grant provision to below the rate of inflation? That is the problem facing the regions.

Mr. Waldegrave: There are two objectives: the maintenance of the arts in the great metropolis—the original objectives set by Keynes—and the spreading of resources into the regions. The Arts Council is making room by difficult and, in some cases, unpalatable decisions elsewhere to give itself resources—not just next year but for many years—to provide more money to the regions direct and through the regional arts associations.

"The Glory of the Garden"

Mr. Jessel: asked the Parliamentary Under-Secretary of State answering in respect of the Arts if he will make a statement on the Arts Council review entitled "The Glory of the Garden".

Mr. Waldegrave: My noble Friend congratulates the council on undertaking such a comprehensive review of its strategy and welcomes its decision to free resources for innovation and development, particularly in the regions.

Mr. Jessel: As the review was published before the Government statement on 11 April that the Arts Council will receive substantial extra funding to provide for the arts in the Greater London and metropolitan counties after the abolition of those authorities, will my hon. Friend give an assurance that the amount assigned will stick and cannot be diverted later from Greater London to the provinces?

Mr. Waldegrave: No. When making that announcement my noble Friend assumed that in the early years in particular the Arts Council would want to spend the great majority of those resources in the abolition areas to deal with the transitional problems of abolition. However, I do not think that the Arts Council would want to be tied down for ever by our saying that all that money should necessarily go to the abolition areas.

Oral Questions

Mr. Norman Buchan: On a point of order, Mr. Speaker. I wish to raise with you a point that occurred earlier when we ended quesions to the Member answering for the Church Commissioners. For a moment it seemed that you would continue with the following part of the Order Paper—arts questions—but you then recovered and returned to Welsh questions.
In fact, the Order Paper states that arts questions
will begin not later than 3.20 pm
That would have enabled arts questions to commence earlier. I do not object by any means to more time for Wales, nor do I ignore the major questions affecting Wales, but I believe that the time now allocated to arts questions — an increasingly important subject — is extremely limited. Given that there was only one Church Commissioners' question and that there were many anxious questions on the arts, perhaps with your help, Mr. Speaker, we can look at this through the usual channels to see whether sufficient time can be allocated to this increasingly important subject.

Several Hon. Members: rose—

Mr. Speaker: Order. Are the other points of order on this subject?

Mr. Dafydd Wigley: Yes, Mr. Speaker. It may not have escaped your notice that on previous occasions we have had difficulty getting enough time for Welsh questions, which clash with arts questions. As today only six out of 20 Opposition Members from Wales were able to be here, would it not be helpful if Welsh questions were moved to a Wednesday so that those hon. Members could be present, in addition to which it might be possible to allocate more time to the arts?

Mr. Clement Freud: Further to that point of order, Mr. Speaker. The House will know that on Mondays, such as this, which hon. Members with an interest in the arts regard as precious, we already lose 10 minutes from the time devoted to questions on the major subject by Church Commissioners questions and questions to the hon. Member answering for the House of Commons Commission. The latter always seems to be the same question answered in the same way. Would you, Mr. Speaker, arrange to bring this matter to the attention of the Procedure Committee so that more than half the questions to the arts can be put?

Mr. Toby Jessel: Further to that point of order, Mr. Speaker. May I point out that today we spent four times as long on Welsh questions as on arts questions, although fewer than twice as many Welsh questions were tabled?

Mr. Christopher Murphy: Further to that point of order, Mr. Speaker. May I congratulate you on allowing arts questions to take place once every three weeks, whereas in the last Parliament they occurred only once every four weeks?

Mr. Speaker: All these matters are better discussed through the usual channels or the Procedure Committee. They are not matters for me. We did well with Welsh questions today, and with any luck we would have reached

questions to the arts earlier had not the one Church Commissioners' question lasted five minutes, which was a surprise to me.

Mr. Buchan: Thank you, Mr. Speaker. We shall try to draw to the attention of the usual channels your helpful nod in our direction. May I have an answer on my specific question? As the Order Paper states
not later than 3.20 pm",
why should we not have moved directly to arts questions?

Mr. Speaker: For the very reason that I have just given. Had we reached the end of Welsh questions before 3.20 pm, we would have reached arts questions earlier. Indeed, that is what I had hoped might happen today.

BILLS PRESENTED

MEDICAL ACT 1983 (AMENDMENT)

Mr. Nigel Spearing, supported by Dr. Brian Mawhinney and Dr. M. S. Miller, presented a Bill to amend section 36 of the Medical Act 1983 to enable the Professional Conduct Committee of the General Medical Council to exercise greater discretion in respect of conduct which they judge cannot be regarded as acceptable professional conduct: And the same was read the First time; and ordered to be read a Second time, upon Friday 6 July and to be printed. [Bill 163.

Orders of the Day — Finance (No. 2) Bill

(Clauses 10, 17, 18, 20, 21, 27, 57, 98, 105, 113, and Schedules 6 to 8 and 12)

Considered in Committee.

[MR. HAROLD WALKER in the Chair]

Ordered,

That the Order in which proceedings in Committee of the whole House on the Finance (No. 2) Bill are to be taken shall be Clause 10, Schedule 6, Clause 17, Schedule 7, Clause 21, Clause 18, Clause 20, Clause 57, Schedule 12, Clause 113, Clause 27, Schedule 8, Clause 98, Clause 105.—[Mr. Peter Rees.]

Clause 10

ZERO-RATING

Mr. Jeff Rooker: I beg to move, amendment No. 1, in clause 10, page 6, leave out lines 13 and 14.

The Chairman: With this it will be convenient to take the following amendments:
No. 2, in clause 10, page 6, line 14, leave out '1st May 1984' and insert '1st October 1984'.
No. 10, in schedule 6, page 132, line 38, leave out Part I.

Mr. Rooker: I was somewhat astonished to read the Amendment Paper and to see that on this important subject and the one to follow—the two debates connected with the imposition of VAT on food—not one of the


Conservative Members who were elected in 1983 had bothered to table an amendment. They must be the most bone idle intake on the Conservative Back Benches for decades. It is either that, or they believe what one new Conservative Member told me last week, that they had been told by the Government Whip not to put down amendments; that it was the Opposition's job to do that. That is the way to keep the Conservative Back Benches quiet.

Mr. Sydney Chapman: The hon. Gentleman is wrong. I draw his attention to amendments Nos. 6, 8 and 3, for example.

Mr. Rooker: I apologise. It had escaped my attention that a Tory Member of Parliament had signed a Labour amendment. Amendment No. 3 is in the names of my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) and others. I was not looking at Labour amendments for Tory names. Perhaps the Government will be as amenable as their Back Benchers and give way on some of these amendments.
When the Chancellor of the Exchequer presented his Budget to the House he gave two reasons for the imposition of VAT on take-away food. He said that it
competes with other forms of catering".
One of the questions that I shall be asking is: which other forms of catering? The second reason that he gave was:
The extra revenue . . . will enable me . . . to lighten the burden of income tax."—[Official Report, 13 March 1984; Vol. 56, c. 303.]
Those were the two reasons that the Chancellor of the Exchequer gave for the imposition of tax on take-away food. I agree that this is a narrow tax, in that it is only on hot take-away meals, but, nevertheless, those are the only reasons that the Government have so far given: first, that it competes with other forms of catering; and, secondly, that the Chancellor of the Exchequer wants the money to lighten the burden of taxation.
Before we consider the impost on the customers, it is incumbent upon the House to consider the effects on the industry. The Government must have made calculations about the effect of the imposition of VAT on the take-away food industry. I hope that the Government have come to the House to give the facts and figures behind the Chancellor's judgment and the reasons for this clause.
According to the Euromonitor 1982, a copy of which I was handed some time ago, a breakdown of the takeaway food industry in Britain—which presumably is historical, although I understand that these are the most up-to-date figures—shows that there are 9,000 fish and chip outlets, 4,000 Chinese take-away outlets, and 2,000 Indian take-away outlets. Together, those three areas make up no less than 81 per cent. of take-away food outlets in Britain. We are told that fish and chip shops form 49 per cent. of all take-away food outlets, the Chinese sector 21 per cent., and the Indian sector 11 per cent.
The others are also-rans. The hamburger trade is the only area to which Ministers have so far referred. Only the Chief Secretary, on Second Reading, gave anything remotely like a detail when at column 250 he specifically referred to McDonalds and Wimpy. Those are the only two sectors which have been highlighted by a Minister, yet 63 per cent. of their business is sit-down meals, on which VAT is paid. The remarkable thing about that sector, highlighted by the Chief Secretary on Second Reading, is that only 5 per cent. of the take-away business is involved

in the fast food hamburger trade—the sort of thing in which McDonalds and Wimpy are engaged. The rest comes from those areas which I have outlined.
Indoor sit-down meals form only 10 per cent. of trade in the fish and chip sector; 90 per cent. is take away. The proportions are similar in the Chinese sector—14 per cent. sit down and 86 per cent. take away. Therefore, fish and chip and Chinese take-away food shops account for 90 per cent. of Britain's take-away trade. We must be clear that that is the sector of the take-away food industry that will be hit. "Hit" is the right word. Both the Chancellor and the Minister of State have at various times since the Budget made it clear that the Treasury has made some calculations about the number of businesses that will close down. On 2 April the Minister of State, Treasury, said that the imposition of VAT on take-away food
is estimated to result in a small net reduction in the number of traders registered for VAT.—[Official Report, 2 April 1984; Vol. 57, c. 367.]
On 26 March the Chancellor of the Exchequer used precisely the same words at the end of another question. He said that the application of VAT to supplies of hot food and drink
is estimated to result in a small net reduction in the number of traders registered for VAT.—[0fficial Report, 26 March 1984; Vol. 57, c. 54.]
The Treasury knows that the figure is small, but how many will it be? The number of businesses that will close down or lose so much turnover that they will cease to be registered for VAT must have been calculated. Will the Government claim that they will all become so small that they will dip under the VAT threshold and that none will close down? The Government must have done some work on that, or they would not claim that there will be a small net reduction. [Interruption.] I am interested in the loss of jobs, but I suspect that the hon. Member for Northampton, North (Mr. Marlow) is not. That is why he is sitting on that side of the House. We are talking about the loss of jobs. That is what the debate is about. [Interruption.] If the hon. Gentleman wishes to intervene, I shall gladly give way.

Mr. Tony Marlow: I was only asking when the hon. Gentleman will stop saying the same thing over and over again and get on with his speech so that we have something to listen to. He has been dead boring so far.

Mr. Rooker: Yes, the loss of jobs and the closure of businesses, small and large, is boring to Conservative Members. That naturally follows. The industry is chock a block with small traders and self-employed people. It matters not; the same speech will be made and the same arguments advanced when we debate the building industry. That is the nature of the industry which the Governmemt are attacking.
3.45 pm
I grant that labour shedding in the take-away food business is more likely to take place in the large chains, which employ a large number of part-time staff. That cannot be denied, because there is a considerable number of part-time staff in the very large businesses to which the Chief Secretary referred. On the other hand, liquidation risks will be higher in fish and chip and Chinese businesses, which are more vulnerable because the businesses are smaller, because they are run by families and because of their ability to take on board the 15 per cent. extra costs that will be imposed under the clause. In


short, it will mean more people on the dole. That is one reason why we oppose the inclusion of this part of the clause.
The Chancellor of the Exchequer said that take-away food competes with other forms of catering. We want to know which forms of catering. It certainly does not compete with restaurants. As I understand it, 80 per cent. of take-away meals are eaten in the home. That is not competition with restaurants, nor can it be competition with any other form of catering. The average spend on a take-away meal is £1·50 per head. With what other form of catering does that compete? Those are the arguments that the Chancellor put forward.
A survey carried out by Audience Selection after the Budget showed that 25 per cent. of the unemployed who were questioned had never had a meal in a restaurant in their lives. By no stretch of the imagination can it be suggested that there is any competition between the vast majority of hot take-away food businesses and restaurants. The Government have to come up with some better reasons for the inclusion of the clause in the Bill than the Chancellor gave in presenting the Budget.

Dr. Alan Glyn: How many take-away meals are eaten on the premises, against the law?

Mr. Rooker: I assume that if 80 per cent. are taken home, 20 per cent. are eaten off the premises, otherwise the meal would not be called take-away. If they are not take-away meals, the customers pay VAT anyway. The debate is concerned not with meals taken inside the premises, at a table, but with meals taken out of the premises where the meals are provided, to be eaten away from the premises. If I misunderstood the hon. Gentleman's intervention, I shall give way again.

Dr. Glyn: There is nothing to stop the purchaser from buying the take-away food and the restaurateur then allowing him to sit down and eat it in the same restaurant.

Mr. Rooker: As I understand it, if that happens after tomorrow the person will have to pay VAT. I suspect that if it happens today the person will have to pay VAT, because the meal is taken inside the premises and is not taken away. Therefore, 15 per cent. is levied on it. If I am incorrect—I believe I am correct, having read the Customs and Excise notices — perhaps the Chief Secretary or the Minister of State will make it clear that the meal to which the hon. Gentleman is referring has VAT imposed on it already.
I referred to the survey carried out by Audience Selection after the Budget. It is interesting to go over some of the figures which it later published. I shall not read them all out, as that would unnecessarily detain the House. Of the people interviewed, 80 per cent. had bought take-away meals in the past. The age range went through the various groups and, according to the sociological terms, the socioeconomic groups. Of the A, B and C1 groups, 82 per cent. had eaten take-away meals, as had 74 per cent. of the D and E groups, and 84 per cent. of the unemployed.
The important question was asked about who would stop buying or who would buy less if the 15 per cent. rate was increased. In terms of the areas of the country where a business loss can be measured, it was shown that in the

midlands there would be a business loss of 20 to 25 per cent. and in the north a loss of 15 to 21 per cent.; and that 27 per cent. of the retired people and 17 per cent. of the unemployed would stop buying. That will mean a considerable loss of business for many small traders.
We can judge what might happen after tomorrow by what has happened since the Budget. It has been forecast that there will be a loss in sales of between 14 and 20 per cent. as a result of putting VAT on such meals. The forecast is so accurate only because many people assumed that VAT had been imposed as soon as the Chancellor of the Exchequer had sat down. Thus, it has been possible to measure a drop of up to 20 per cent. in the take-away trade, because, wrongly, customers thought that there had been a 15 per cent. hike in prices. That drop in sales, which will not all be made good, will undoubtedly lead to a loss in the amount of VAT that the Government will receive. I understand that the Government estimate that imposing VAT on such food will bring in about £200 million per year. However, according to the industry, if it has already lost so much of its turnover, the Government's estimate of £200 million may be reduced by anywhere between £30 million and £60 million. By any standards, that represents a considerable loss.
There is no argument between the industry and the Government about the value of the take-away food industry. I understand that it is fixed at about £1·3 billion, spread among several thousand very small traders. The Government intend to employ 12 extra VAT inspectors to police evasion and to ensure that the many thousands of outlets—many of which do not pay VAT at present—are caught in the VAT net. It is clear that 12 VAT inspectors will not be up to the job. However, perhaps the Government forecast a somewhat larger number of closures than we have been led to believe. Indeed, that is why it is important that, in reply to the debate, the Minister should give the House and the industry, as well as the customers, some idea of the number of closures that the Government forecast. That is crucial, because the Government must have grounds for having decided on 12 extra VAT inspectors.
The Government have not said much about fairness and equality of treatment as between Britain and, for example, the EEC. People in the member states of the EEC pay, on average, 7 per cent. on take-away foods. Why should people pay 15 per cent. in the United Kingdom when, for take-away meals, other countries sometimes have special rates that are lower than those for meals eaten on the premises? Why should we pay twice the average amount of VAT paid on take-away meals in the EEC? There can be no argument about differentials, because in the Netherlands there is a differential rate for snacks as opposed to whole take-away meals. There is an incentive for customers to buy whole meals to take away instead of snacks, because there is a differential of 5 to 19 per cent. in the VAT charged.
Of course, the Government got their figures on the EEC in a complete mess. The worrying factor was that they got the figures that they gave to the House in a mess in February, presumably at a time when Treasury Ministers and their advisers were calculating how much extra the Government would obtain by taxing food in this way. When the Minister answered the hon. Member for Devon, North (Mr. Speller) on 7 February, he gave figures for nine EEC member states. The United Kingdom was one of them—which he had to get right—and Denmark was


another, which he got right, but the figures for the other seven were all wrong. He got the VAT rates for take-away food wrong in seven out of the nine EEC countries. I did not sniff that out. The industry pointed it out to me, and, I suspect, also to Conservative Members.
On Second Reading, I raised that matter, but unfortunately the Government ran away from the debate and the Minister did not have a chance to reply. However, last Thursday the Minister answered another question and said:
I regret that much of the information is at variance with that given to my hon. Friend the Member for Devon, North (Mr. Speller) on 7 February . . . and I apologise for having inadvertently misled the House.—[Official Report, 26 April 1984; Vol. 58, c. 610.]
Of course, we accept that apology, but how can a senior Treasury Minister, a month before the launch of a Budget get the figures for seven out of nine EEC countries wrong? Hours must have been spent in discussion and calculating the effect on the take-away food industry in the United Kingdom.

Mr. Mark Fisher: Is not my hon. Friend drawn inevitably to the conclusion that the whole basis of the Government's case is false because their figures were incorrect? Surely they should withdraw the proposal.

Mr. Rooker: Perhaps the Government miscalculated what they would collect in VAT from the industry. Their comparisons with how VAT operates in other countries were wrong.
We offer the Government two ways out. First, they could withdraw the proposal to impose the tax. It would be the easiest thing in the world for them to do that today, because the tax does not take effect until tomorrow. The Government could say, "We have made a mistake. We do not really need the money. We realise the damaging effect that the tax will have on the industry. It will close X thousand outlets and increase the dole queue by X thousands of people. We have decided that it is not a good idea, so we shall pack it in." If the Government were to say that, we could now start the next debate about VAT on building alterations.
The alternative to that approach is contained in amendment No. 2. The Government could delay the imposition of the tax until 1 October. There is nothing special about the date; it could be 1 December. The idea is to delay the imposition of the tax until the autumn when the price of potatoes in particular is at its lowest. Potatoes are only one ingredient of take-away meals, but the fish and chip take-away sector, with 9,000 outlets, operates 49 per cent. of all take-away businesses. The price of potatoes is important. The industry would more easily be able to take on board the extra impost if it were to start when a main ingedient was at its lowest price. The alternative is reasonable.
The proposal is not a wrecking amendment. It would give the industry time to reorganise itself. It would make a little difference to the Government's income, but the Government will anyway lose some of the extra income which they thought they would gain, simply because of loss of business. Such an announcement today would restore the level of business to somewhere near what it was before the Chancellor delivered his so-called popular Budget a month ago.
The Chancellor said that the imposition of VAT on take-away food would lighten the income tax burden. The

Chancellor is a member of a Government who have increased the income tax burden over the last five years, however they try to juggle the figures. For him to say that he wants to tax take-away meals purchased by people who do not pay income tax to pay for income tax cuts is reason enough for any sensible Opposition to oppose the Government.
The Government argue that they want to lessen the tax burden of, for example, Ministers earning £800 a week by taxing take-away food bought by non-tax paying pensioners, students and the unemployed. That is what the proposal means in black and white. People who are so poor that they are below the tax threshold will have to pay an extra tax so that the burden of those who pay income tax can be made lighter. With the present state of the British economy, it is downright immoral to shift the tax burden from the rich to the poor. For that reason, I ask any sensible hon. Member who is interested in the industry, the customers and the people about whom I have spoken, to join us in the Lobby later.

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Mr. Michael Fallon: I rise for two reasons: first, to demonstrate that the 1983 intake is not quite as idle as the hon. Member for Birmingham Perry Barr (Mr. Rooker) might have suggested; and, secondly, to mention a point which he did not raise — the application of clause 10 to wholesale and retail bakeries. The well-run family firm of Murrays of Darlington is an example. If such a firm is not to go to the expense of installing separate tills for standard-rated and zero-rated products it has been advised by the local tax office that it must estimate the proportion of gross takings that relate to standard-rated supplies—hot pies, soup and so on. It must submit such an estimate to the local VAT office.
It will not have escaped the notice of my right hon. and learned Friend the Chief Secretary that such a proportion could vary considerably during the year. It might vary according to the season, month by month, or the standard of baking on a particular morning. When considering the application of the clause to bakeries, while accepting the need for VAT to be applied, the important point for many bakeries will be the proportion of gross sales that fall within the scope of the new regulation.
I wonder whether my right hon. and learned Friend would agree that, excluding the exemptions that have been announced, if hot food sales in a bakery fall below a certain proportion of overall gross sales, there might well be a case for deeming such premises to be outside the scope of the clause.

Mr. D. N. Campbell-Savours: On a point arising—

Mr. Fallon: I have finished speaking.

Mr. Campbell-Savours: rose—

The Chairman: Order. The hon. Member has concluded his speech.

Mr. Max Madden: In the Budget statement, in what he described as a broadly neutral Budget, one of the Chancellor's less profound comments was that there must inevitably be gainers and losers. Since then, more people have come to see themselves as losers as a result of the Budget than as gainers. Those in the poorest section of the community realise that they are


considerable losers, not just as a result of this Budget, but as a result of all those that have come from the Government since 1979.
This measure will adversely hit a large section of the poor in our community. The introduction of this measure took only eight lines in the Budget statement of 13 March. I do not believe that the Chancellor recognised the storm of controversy that the proposal would spark off. Today's debate will illustrate how unnecessary the measure is. It is a direct attack upon the poorest section of our community. It is hitting the small businesses which this Administration have said year in and year out they wish to buttress in every conceivable way.
I hope that after the debate the Government will recognise that they are wrong to pursue the proposal and will quietly withdraw it. If they do that, it will be welcomed not just by those involved in providing hot take-away food, but by those who depend upon it for their only hot meals. Many people depend upon hot take-away food to provide their only hot meal of the week.
I do not believe that the Chancellor knew what he was doing when he proposed this measure. I do not believe that he frequents fish and chip shops. I suspect that his idea of a fish and chip shop is something like Pruniers. I do not believe that the Prime Minister frequents fish and chip shops. She took the media circus to Harry Ramsden's before the general election. She plainly saw the publicity advantage in doing that, but she upset most of the other customers, who could not get a meal.
The Government do not understand the importance of fish and chips to many poor people. Government Members do not use fish and chip shops themselves. I suspect that the Prime Minister detests fish and chip shops and does not use them, any more than she uses the National Health Service or the railways.
The day after the Chancellor made his proposal he was written to by Mr. Harry Sagar, the general secretary of the Bradford and District Fish Friers Association. I believe that the letter neatly spells out the true implications of the proposal and puts it into a context which the Government clearly do not understand but which Mr. Sagar and his colleagues do. The letter to the Chancellor states:
Our members are appalled at the imposition of 15 per cent. VAT on fish and chips.
Throughout the present season potatoes have been costing two-and-a-half times the price of last season. With the mid-January estimate of stocks being 838,000 tonnes down on the corresponding period of last year the price is rapidly rising and, in all probability, will continue to do so to the end of the present season. Also fish has reached prices unheard of before, and dripping has also increased in price. Those are our three main commodities. But, in addition, the frier has suffered increases in rates, water rates, gas, electricity, wages, paper and flour. The 4½p increase in the price of petrol will also have the effect of increasing prices still further, as all goods have to be transported.
And now comes this VAT imposition which undoubtedly will have a devastating effect on trade. Many shops will close, and others will be compelled to dispense with staff, both full-time and part-time.
We operate in an area which must have one of the highest pecentages of unemployed in the country. We also have our proportion of pensioners for whom fish and chips are the one hot meal they get in a week. The people who will be hit hardest are the poorest section of the community who will have to meet the increases but whose incomes are too low to benefit from the alterations in the level at which tax is taken, as they do not pay tax.
The Sea Fish Industry Authority has indulged in an expensive advertising campaign to promote the sale of fish, but this latest move will completely neutralise their efforts.
The self-employed invest their capital in their businesses (and sometimes borrow money at high interest rates to do so), pay, in addition to NHI and standard rate of tax, 6·3 per cent. Class 4 NHI, sacrifice their right to unemployment benefit, work long and unsocial hours and most Bank Holidays, and have their wives working with them. They are also the best bet for the Health Service as they are hardly ever off work. These are the people who expected this Government to support them. Yet they face the prospect of a threat to their livelihoods and the devaluation of their properties.
We seriously urge you to have a re-think on this imposition of 15 per cent. VAT.
That is a representative view expressed by the general secretary of my local fish friers association. It is a view which has been expressed to me by many others in the trade. I have received petitions containing thousands of signatures from people who have been protesting over the past few weeks at the imposition of VAT on fish and chips.
I again urge the Government to listen. They talk constantly about the need to listen to what people say. People in areas such as mine, which suffer from high levels of unemployment and acute poverty, say that this is an unfair, unjust and unnecessary imposition. I believe that it has been suggested by people who are ignorant and uncaring about the social consequences of many of the measures which they have introduced not just in this Budget, but in previous ones.
If, as they say, the Conservatives are anxious to help small businesses, they should listen to the representations that are being made on this issue. Above all, they should listen to the protests that are being made by the poor people of the nation, who will suffer acute hardship if the Government go ahead with these proposals, which will fall particularly heavily on the unemployed and on pensioners.

Sir Peter Blaker: In my constituency there must be as many hot take-away food shops per square mile as there are in any other part of the country. I warn my right hon. and learned Friend the Chief Secretary that the proprietors of these shops—I refer mainly to fish and chip shops—are genuinely concerned about the imposition of this tax.
The hon. Member for Birmingham, Perry Barr (Mr. Rooker) made a valid point when he said that 90 per cent. of the products sold by fish and chip shops are taken away as opposed to being consumed on the premises. In other words, 90 per cent. of their business will be subject to this new imposition, and that is a greater percentage than applies to hamburger shops and other types of hot take-away food establishments.
I have four questions for my right hon. and learned Friend. Reference has been made to the report by Thornton Baker and Co., copies of which have been sent to hon. Members. The survey which that company conducted shows that there might be
a possible national reduction in the level of hot take-away sales of between 14 and 20 per cent. These figures reflect the actual experience of the trade in the two weeks immediately following the Chancellor's announcement
when, as has been said, many people assumed that the tax had already been imposed. If true, they are serious figures. The report continues:
It is not possible, however, to draw any conclusions regarding the long-term effect.
The report concedes that the survey was conducted quickly — because that was the request made of Thornton Baker—and that therefore it is not a scientific


or fundamental survey. Nevertheless, it provides cause for concern. Does my right hon. and learned Friend have any comment to make on the figures which Thornton Baker produced? Have the Government any estimate of the loss of business which is likely to result?
Secondly, do the Government have any estimate of the likely loss of jobs? Constituents have told me that they expect the loss of business to lead them each to lay off one or two staff. We are speaking of small enterprises. If we assume that there are between 19,000 and 20,000 hot take-away food shops in the country as a whole, it will be serious if each lays off, say, one employee.
Thirdly, have the Government made an estimate of the likely loss of income tax, and possibly corporation tax, resulting from such a loss of business as Thornton Baker expects, and has an estimate been made of the additional unemployment pay to those who lose their jobs?
My fourth question relates to a point made by my hon. Friend the Member for Darlington (Mr. Fallon), in relation to apportionment. Many take-away food shops sell both hot and cold food—for example, pies. Will it be possible for them to reach agreement with Customs and Excise about the proportions which they traditionally sell of the two, the hot and cold foods, for the purpose of arriving at the amount of VAT that they must pay? As I read the relevant notice issued by Customs and Excise, that will be the case, but it seems that some of my constituents have been given the opposite impression.
Perhaps my right hon. and learned Friend will clarify the position. I hope that he can reassure the House on some of these issues, although we shall have an opportunity to return to the matter on Report should that prove necessary, by which time the tax, if it is imposed, will have been in operation for some weeks.

Mr. Cyril Smith: Having just spent a weekend in Blackpool, I appreciate the concern of the hon. Member for Blackpool, South (Sir P. Blaker), who should remember—I say this with respect to him because his experience is greater than mine—that it is always more difficult to get a tax removed than it is to prevent its being imposed. I strongly advise him, therefore, if he is against this tax, to vote with us against it, rather than hope to get it removed on Report.
The whole of clause 10 should be sunk without trace. It follows that I support the various amendments which would achieve that objective, especially those which refer to VAT on hot take-away foods. The provisions of the clause which refer both to hot food and to property have much in common: the criticisms that can be made of one can, in many ways, be made of the other. For example, both are a tax on the customer. The hon. Member for Birmingham, Perry Barr (Mr. Rooker) said that £200 million was the estimated revenue from tax on hot take-away food. Let it be clear that the customers will pay that money.
Both taxes will lead to utter confusion in implemention, and I shall say more about that in relation to hot take-away food. Both taxes will hit the economically poorer members of society harder than any others. Both are liable to destroy, rather than create, jobs. Further, both are more likely to hit the north than the south, again demonstrating the Conservatives' ability, if not desire, to divide the country into two nations.
The VAT on hot take-away food is utter nonsense. Let us consider its collection. Let us imagine a bloke standing in a fish and chip shop, thermometer in his hand, trying to convince a customer that the temperature of one pie is such that he must charge VAT on it, whereas, because the thermometer proves that the temperature of another pie in relation to the ambient air temperature is lower, he need not charge VAT.
A dear old lady goes into a fish and chip shop and says, "I want a pie, please." The proprietor replies, "It will cost you 15 per cent. more for this pie than for that one." "Why," she asks, "when they are similar pies?" "This one," replies the proprietor, "has a temperature higher than the ambient air temperature." The old lady asks, "Would you please explain what you mean by the ambient air temperature?" The proprietor then produces his little thermometer and, having tested the temperature of the air, places it against the pie to prove that he is right to charge VAT.
The whole thing is ridiculous. Indeed, because one is at the back of a queue one could pay less than if one were at the front, because by the time one comes to be served the food has become cold. The man behind the counter might invite the customer to move from the front of the queue to the back, as he will then have a chance of buying his pie at a cheaper price. This will be a ridiculous tax.
The collection of the tax will be undertaken by VAT inspectors. The hon. Member for Darlington (Mr. Fallon) talked about bakeries, and his object was to destroy the criticism of the hon. Member for Birmingham, Perry Bar of the 1983 Conservative intake. The hon. Member for Darlington merely substantiated the criticism. He should have tabled an amendment to remove the provisions that we are discussing.
How is the tax inspector to be satisfied that a percentage of food was sold at above the ambient temperature and that another percentage was sold below it? It is on the resolution of that issue that the imposition of VAT will be decided. It is nonsense to try to impose VAT on take-away food, and the determination of which food is liable and which is not will similarly be nonsense. The greater difficulty will lie in convincing the customer that some types of food are liable to VAT and others are not. It will be equally difficult for the person who is selling take-away food to convince the tax inspector that certain foods are liable and that others are not.
As so often happens, the tax commissioners will assess this VAT liability at a high level. They will continue to do so until the person upon whom it is levied begins to squeal. Tax commissioners will not admit publicly that they adopt that principle, but many will accept in private that they do. When the taxpayer squeals, the commissioner will reduce the sum that is claimed. If he squeals a second time, the sum will be reduced still further.
This approach is often taken when making assessments for farmers. The commissioners will continue to increase the tax demands until the farmer squeals. If the owner of the fish and chip shop squeals, the VAT inspector will probably say, "I accept what you say. Yes, you are right." None the less, the first assessment will be high and he will hope that there will be no squealing.

Mr. Christopher Hawkins: I do not wish to interrupt the hon. Gentleman's serious arguments, but


I wish to put the record straight about the new Conservative intake not tabling amendments to the Finance Bill.

Mr. Rooker: It has not tabled amendments on the VAT liability that is to be extended to take-away food.

Mr. Hawkins: I have tabled three amendments, and all three are to be discussed later this afternoon.

Mr. Smith: I compliment the hon. Gentleman on tabling his amendments. I am sure that he finds great satisfaction in having done so.
My mind boggles when I consider the collection of the tax. I am worried about the tax and its likely effect on the sale of take-away food. I believe that the Chancellor of the Exchequer had no idea what he was about when he decided to levy a tax upon it. It has been said that the Prime Minister probably does not know what a fish and chip shop looks like. I guess that the Chancellor probably does not know either. I bet that the right hon. Gentleman does not understand the use of a fish and chip shop, even if he knows what one looks like.
We have a Chancellor who is too clever by half and who has no respect for the other half of the community. He does not know how it lives and he does not know what economic deprivation is all about. Does he know that many thousands of pensioners in the north of England like a fried fish occasionally? It is a luxury that many of them like once a week. Very often they will ask someone to buy the fried fish for them. When someone is living on his own—many pensioners are in this position—he will find it cheaper to buy a fried fish than to buy a fresh fish and try to cook it himself. That is currently the position, but 15 per cent. VAT is to be levied on fish and chips that are taken away from the shop.
I bet that the Chancellor of the Exchequer does not know the taste of chips with soup on them. I can assure him that it is a nourishing and pleasant dish. I know that I am boring the Chief Secretary to the Treasury. I appreciate that my arguments have nothing to do with his standard of living. He has never been used to chips with soup and he probably does not know what I am talking about. I assure him that I know what I am talking about. I have eaten dozens of chips-with-soup meals, and it is a delightful meal. It is a nourishing, cheap and good way of feeding a family. Given the right hon. and learned Gentleman's background, he probably does not understand that. He can look as bored as he likes, and he can blow through his lips as much as he likes, but he will get what I have to say. I believe that I am speaking for a section of the community that he knows nowt about, and it seems that he never will.
I suspect that people in the north of England eat good old fish and chips much more often than those in the south, and I suspect also that my constituents know far more about fish and chips than the Chancellor does. I concede that if we were talking about caviare, wine and pheasant he would know much more about them than do my constituents.
Fish and chips represent part of the staple diet of those in the north of England, and the people in the north will be attacked by the imposition of VAT on fish and chips. The imposition of this tax on take-away food shops will mean that pensioners, large families, students and people

living alone will be subject to extra tax. In many instances it will be regarded as a savage increase in tax. An extra 15 per cent. on present prices will be a sizeable slice of the income of many who are the customers of take-away fish and chip shops. The same argument applies to fried chicken and kebabs, for example, but the greatest effect of the proposed tax will fall on fish and chips.
As I have said, I think that take-away fish and chip shops are used more in the north than in the south. The hon. Member for Perry Bar said that 49 per cent. of the outlets that will be affected are fish and chip shops, and my figure is 46 per cent. He said that 37 per cent. of the outlets that will be affected are ethnic shops. I look forward to the day when VAT inspectors discuss ambient and non-ambient food temperatures with the owners of ethnic shops.
Many thousands of take-away outlets are small businesses. I emphasise "small", because I thought that the Government were concerned about small businesses. They keep on telling us that they are. I remember the Secretary of State for Education and Science tripping off to Bournemouth, or somewhere on the south coast, before the general election to address a conference of small business men. He told them that a Conservative Government would be their saviour. The Government are supposed to pride themselves on helping small businesses. I remind the Minister that 19,300 outlets will be involved with this proposed tax and that the vast majority of them are small businesses.
How many of these small businesses will go out of business as a consequence of the imposition of 15 per cent. VAT on hot take-away foods? The right hon. Member for Blackpool, South referred to a survey, to which I have also referred. I understand that most of the businesses concerned enjoy profits that range between 15 and 20 per cent. It is estimated that between 6 and 11 per cent. of the profits will disappear as a consequence of the tax. If a business at the bottom end of the profit margin suffers at the top end of the imposition of VAT, the result will be closure.
Jobs go if businesses close. The Chief Secretary to the Treasury should not underestimate the importance of fish and chips to small companies which do not have their own canteens. Many workers in those small businesses eat foods from fish and chip shops for their lunches. Lunches are ordered at 11 o'clock or 12 o'clock and the meals are brought in at 12.15 pm for the 10 or 15 workers in the factory. The tax might force many of those small businesses to close and limit the service to employees. The Government should not underestimate the effect of the tax on small businesses. The Government are supposed to be the saviours of and God's gift to those businesses.
It is unlikely that the Government will yield on the clause. We shall, therefore, however uselessly, go into the Lobby and vote for the amendment. We hope that the Government will get the message. Many hon. Members—they are not confined to one party—are opposed to the tax on hot take-away foods. I hope that if the Government do not get the message from all hon. Members who oppose the clause, they will at least do so from the people adversely affected by the tax. I repeat: pensioners, students, the unemployed, large families and the economically poorer members of our society will feel the imposition of the tax. That is why I shall have no hesitation in voting against the Government's measure and supporting the amendment.

Mr. Jim Lester: I declare an interest as the honorary adviser to the National Association of Master Bakers, Confectioners and Caterers. I shall therefore make a point similar to that made by my hon. Friend the Member for Darlington (Mr. Fallon).
As a one-nation Tory, I believe that it is stretching the imagination to suggest that this tax is a deliberate act to harm the north or middle of the country. A survey of convenience food shops, including fish and chip shops, would show that the three categories—fish and chip, Chinese and Kentucky fried chicken shops—are spread throughout the country, so it is unfair to suggest that this tax is a further attack on the north.
One ought to spring to the defence of my right hon. Friend the Chancellor of the Exchequer. [HON. MEMBERS: "Why?"] I have not always been a great defender of the Chancellor, but on this point I support him. My right hon. Friend is a well-known consumer of fish and chips in his constituency. He goes into fish and chip shops as regularly as most hon. Members. Because of the nature of our work and difficulties in obtaining meals, hon. Members find fish and chip shops very convenient. I believe that many hon. Members on both sides of the House are thankful for those shops.
I cannot say the same about the Prime Minister, because I do not know the position of fish and chip shops in Finchley. Frequently, after 9 pm the Prime Minister can be seen in the Strangers Cafeteria eating fish and chips with the drivers, when Opposition Members have gone somewhere else for a good dinner. It is unfair to criticise this clause by talking about caviar and other items. We all know that that is nonsense.
We would listen more seriously to Opposition Members if we knew their objection in 1964 when they broadened the tax base of VAT to soft drinks, crisps—

Mr. Stuart Bell: Will the hon. Gentleman give way?

Mr. Lester: Just let me finish the sentence. Labour broadened the base of the tax in 1974, which fell on the same type of people.

Mr. John Maxton: The hon. Gentleman said 1964.

Mr. Lester: I apologise. I meant 1974. I hope that helps the hon. Gentleman.
The Labour party recognised the need to broaden the tax. The Opposition's arguments, including those about pensioners, apply equally to families, including children. I suspect that the broadening of the tax had a greater effect in terms of monetary value on families than the tax on fish and chips and other take-aways will have. By and large, convenience foods provide the most expensive way of eating. I accept the points made by the hon. Member for Rochdale (Mr. Smith) about single pensioners. It is true that fish and chips provide an important meal. I hope that its cost is covered in the RPI and when pensions are raised. Some hon. Members may question the political judgment adopted towards the basic industry of fish and chips.
Misunderstandings occur in considering where the tax will fall and how it will be collected. The National Association of Master Bakers, Confectioners and Caterers does not object so much to the tax put on catering foods. Customs and Excise has explained how catering foods can

be separated from hot bread and hot sausage rolls. Many of us savour the glorious smell in a baker's shop and then buy a product. How can we be clear about the tax? Instructions have been given by Customs and Excise, but the position is still ambiguous. Mixed shops, and even those without a fixed catering side, have difficulties. People may eat sausage rolls just because they like the smell. A passing VAT man may cause difficulties.
I ask my right hon. Friend to examine the basis on which the Government will collect the tax. My right hon. Friend should consider the difficulties and anomalies that will be created. Inspectors will be needed. Those factors should be taken into account when considering extending the tax. I hope that my right hon. Friend will seriously consider those points. Many of us wish to ensure that we tax spending, not incomes. This is an important change. Imposing a tax and merely looking for candidates for that tax is perhaps not the best method of achieving our aims.

Mr. William O'Brien: The tax has been included in the Finance (No. 2) Bill because it will allow competition with other catering outlets. As the hon. Member for Birmingham, Perry Barr (Mr. Rooker) said, the legislation seeks to increase the amount of money available to lighten other tax burdens. earlier this year, further impositions were made in the form of increased electricity charges. The Opposition pointed out that such charges would affect most those on fixed incomes, including pensioners.
If this part of the Bill is not withdrawn, further impositions will be made on millions of people who rely on hot food outlets for meals. Many people in my constituency will be affected. In many instances, fish and chips provide the main meal for many families. I and my hon. Friends plead with the Government to have second thoughts about this part of the Bill.
I refer to fish and chip shops where there are no facilities for sit-down meals. There are a number of such outlets in my constituency. The meal is always taken away. There is no possibility of eating it on the premises. Like other hon. Members, I believe that the Chancellor is unaware of the function performed by fish and chip shops in areas such as mine. I therefore join the appeal that he should reconsider the position of outlets with no sit-down meal facilities, the majority of which are run by self-employed persons or by small business people employing perhaps two or three part-time workers. I believe that the Bill will adversely affect the number of people employed in those small businesses.
I, too, have received letters expressing great concern about the proposed imposition of 15 per cent. VAT on take-away fish and chips. Again, this is a tax on people with low incomes, hitting the many unemployed and elderly people in my area as well as young people and schoolchildren who rely on fish and chips as a basic, substantial meal. This comes on top of the increase in tax on beer and other commodities enjoyed by people in areas such as mine.
A constituent in the fish and chip business wrote to me as follows:
I would like you to object on our behalf to Mr. Lawson putting V.A.T. on fish and chips.
As a good constituency representative, that is exactly what I am now doing. I also sent a copy of the letter to the Chancellor with a supporting letter from me asking him to consider withdrawing this part of the Bill. The writer of


the letter is self-employed, and he took over a small business only 10 months ago. The tax is a body blow—a sucker punch—just as the business was getting off the ground. He goes on to say that there are special offers for the many children who buy fish and chips at the shop. So far, prices have been held at 30p, but the VAT alone, without any other increases in costs, will mean a price rise to 35p. This will severely affect people on unemployment benefit or other low incomes who rely on fish and chips for their midday or evening meal. That meal will now be subject to 15 per cent. tax. The writer adds that prices have been kept down
because there are a lot of old people who rely on fish and chips plus a lot of poorer families who rely on them as a cheap main meal. This is going to hit the old and poorly paid not to mention us a so-called 'small business man'. I am writing to Mrs. Thatcher and Mr. Lawson.
4.45 pm
I am sure that many hon. Members have received similar representations. When I forwarded the letter to the Chancellor, I asked him to reconsider his proposal because of the serious effects on the old, the unemployed and other low-income groups. Only yesterday I received representations from a constituent in the village of Gawthorpe who has been in the fish and chip business for more than 50 years. He provides a take-away facility for the community. There are no facilities for sit-down meals and his customers have expressed great concern about the proposal to impose VAT on take-away meals. My constituent points out that he has always worked in working-class areas, meeting the needs of the poorly paid, the pensioners, the young unemployed, and so on. He believes that both his business and his customers will be seriously affected.
I have received representations from all quarters asking me to object to the proposal. Therefore, like other hon. Members who have spoken today, I appeal to the Minister to reconsider this part of the Bill. If it cannot be withdrawn, I hope that the amendments will be favourably considered. I am sure that the groundswell of opposition is evident in Conservative areas and is not confined to Labour constituencies. I hope that the Government will be persuaded by this groundswell of opinion and objection to have second thoughts on the matter.
The Government appear to have a policy of hitting those who can least afford to pay. By this measure, they are taxing those whose income does not reach the level at which tax has to be paid. A substantial number of people in my constituency are in receipt of rebates for rent and rates. Through this measure, the Government are taking from them a certain amount of their earned income. As a constituency Member, I appeal to the Minister to have second thoughts and to consider the appeals that have been made. I ask that this measure should be withdrawn, or that Conservative Members should consider supporting the amendment.

Sir Walter Clegg: I have listened with interest to the hon. Member for Normanton (Mr. O'Brien). As a northerner myself, I appreciate the importance of fish and chip shops and other food take-aways in the north of England. But we delude ourselves if, like the hon. Member for Rochdale (Mr. Smith) we think of this measure as being aimed specifically at the north of England. Fish and chips are sold in all parts of the country, and certainly in most of the major holiday resorts.
The constituency of my right hon. Friend the Member for Blackpool, South (Sir P. Blaker) adjoins mine and we are both concerned about the impact on the holiday trade. I am also concerned as the representative of Fleetwood, a fishing port that has taken some tremendous blows in the past. Any further blows to the fish trade would be very bad for us indeed.
Representations made to me make it clear that orders from the fish friers to the suppliers on the dock have decreased since the Budget was announced. No doubt people assumed that the tax was to be levied at once and did not realise that it was not to come into effect until tomorrow.
I have also read the Thornton Baker report, which shows the impact of the measure. With all increases in indirect taxation, there is an immediate reaction and then a recovery. That happens in the case of cigarettes and beer.
The Government should carefully consider what happens between now and the Report stage. They will then see what happens once the tax starts to be paid, and that will be a better guide than what has happened up to now.
I associate myself closely with the request by my right hon. Friend the Member for Blackpool, South, and I hope that my right hon. and learned Friend will reply to it during the debate.

Mr. Campbell-Savours: I should like to reinforce the comments of the hon. Member for Rochdale (Mr. Smith) about what happens at midday in factories in his part of the world. In my former incarnation I was a small Lancashire entrepreneur. I remember that it was the custom for someone in my factory to be appointed to buy the fish and chips at lunchtime. There will be anger throughout that part of the country, and throughout the whole northern region, when the impact of the new tax is felt.
In the speech of the hon. Member for Darlington (Mr. Fallon) there was a conspicuous lack of any reference to the item under discussion. The hon. Gentleman sought to speak on behalf of the people of Darlington, and yet he made no reference to fish and chips, although many people in his northern constituency must be very angry.
While canvassing before the by-election in Darlington last year, I went out with a number of my hon. Friends to buy some fish and chips. During conversation, the proprietress, without malice, expressed a different political view from our own. I said, "They will be taxing fish and chips next, you know." She laughed—but, 12 months later, it has been done. I hope that the proprietress of that shop will read my remarks in the Official Report. I hope that she will also take her concern to the hon. Member for Darlington. He might well wish to refer to the matter at a future stage.
I am in a curious position today in that I find myself in support of the fast food industry lobby. Three years ago, I was a member of the Committee on the Local Government (Miscellaneous Provisions) Bill. In Committee it became clear to me that one member of the Committee—he is no longer a Member of the House—was being paid by the fast food lobby to represent its interests. I warned him that if he sought to vote, I would expose on the Floor of the House his pecuniary interest in the matter that we were debating. Unfortunately, he did not vote.
Then I strenuously opposed the lobby. Now, I support it. I hope that members of that lobby are listening. I hope


that they will realise that it does not pay to pay hon. Members to represent their interest. A lobby needs someone who can argue the case objectively, uncompromised by pecuniary gain. That is my position today.
My main objection is to the regional emphasis of the measure. I see the hon. Member for Peterborough (Dr. Mawhinney) wincing, but there is indeed a regional emphasis. The research done by Thornton Baker reveals that more fish and chips are eaten in the north of England than in other parts of the country. There is therefore a regional bias in the effect of the measure. In the same way, if a tax was imposed nationally on service charges, it would fall most heavily on Londoners because more people in London pay service charges on flats. There is a regional emphasis in that sense, and the Government have not taken it into account.
Like other right hon. and hon. Members, I have received a letter from the Preston and District Fish Friers Association, an organisation based in the north and north-west. The association describes its concern about this imposition. While we are considering the regional emphasis, it may be worth noting what the association says:
We are sure that you are aware of the fact that the fish and chip shop owners are still suffering from the shock of the Chancellor's proposal to impose V.A.T. on our product. Thousands of small business owners, who put their trust in you at the last election,"—
I presume that the association is referring to Conservative Members as well—
are now pleading for your support. We beg you to oppose this shameful tax on food that will tear the heart out of yet another traditional northern industry, the fundamental role of which is interwoven into the very fabric of northern life.
I could not put it better. The letter shows the strength of feeling in the north and north-west. The right hon. Member for Blackpool, South (Sir P. Blaker) and the hon. and learned Member for Blackpool, North (Mr. Miscampbell) must share that view.
My second objection is that this is a direct attack on service trade, yet the Government have repeatedly told the country that they give it optimum support. This is another measure which shows how people have been misled. The Preston and District Fish Friers Association has strong words about that too. It says:
If this tax is applied to take-away foods it will mean the ruin of many fish chip shops, the type of businesses the Conservative Government claim to care about.
That is good simple talk which expresses precisely the views of people throughout the northern region.
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My third objection derives from my belief that the Government are here doing only part of the way. I believe that next year they will introduce VAT on all foods. At col. 1096 on 5 April 1984, in reply to a question by my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) asking the Chancellor whether he would give a clear undertaking that he had no intention of imposing VAT on basic foods, a question which one would have thought would have elicited a two-letter response—"No"—the right hon. Gentleman said:
I have no present intention"—[Official Report, 5 April 1984; Vol. 57, c. 1096.
The operative word there is "present". It is clear that the Government's long-term objective, probably in next year's Budget, is to introduce VAT on food to raise additional revenue. The country is entitled to ask where that revenue is going. The clauses concerned with the use

of that revenue will be discussed upstairs away from radio, the media and the public. They will be discussed not behind closed doors but in Committee where not too many people from the outside world will be present. In Committee we shall hand out substantial amounts of money in concessions on capital gains tax and capital transfer tax and other tax concessions to the higher paid. That is where the money goes. The rich are not being required to give or not to take. The money is to be taken from the people who buy fish and chips in Workington and other constituencies represented by my right hon. and hon. Friends.
My fourth objection derives from the fact that there has been a complete lack of consultation about the measure. Once again the wise people of Preston, in the shape of the Preston and District Fish Friers Association, put it best. It says:
It is a vicious tax imposed without consultation with our industry, and creates so many anomalies it must be considered to be un-workable and will obviously alienate so many of your supporters.
There has been no consultation with the regional chambers of trade, the chamber of trade in Blackpool, the chambers of commerce, the National Federation of Fish Friers, the Take-Away and Fast Food Federation or the low income group lobbies, such as Child Poverty Action Group and the Low Pay Unit, all of which would have had much to say if they had been consulted. The Government have not consulted such bodies which represent people whose diets rely on fish and chips.
We know that whatever we say in the Chamber will have no bearing on what happens. Through the Patronage Secretary, the Minister has arranged for his right hon. and hon. Friends to troop loyally through the Government Lobby. The debate is cosmetic, as it will have no influence on what the Government do. Many people will not know about the sense of anger that I and my hon. Friends have expressed. That anger is demonstrated by the 1 million people who, I understand, have protested through petitions, and there is a prospect of a day of action by some people in the industry. Despite that, the industry has sensibly commissioned the Thornton Baker and Co. report, the findings of which are remarkable. It shows that there was a reduction in sales immediately after the Budget announcement and before the implementation of the 15 per cent. VAT surcharge—that is what it is—on fish and chips. There has been a 10 to 20 per cent. reduction in sales. That is credible, as we all know what happened with insurance policy sales. The prospect of the withdrawal of the facility for tax relief on life assurance policies, which was founded on a leak, had a major effect on the life assurance market. The reduction in trade has led to a loss of jobs.
We also know from the report that there is general agreement that low-income families, students, pensioners, the unemployed and school kids will be the worst affected. The Preston and District Fish Friers Association continues:
H.M. Government has chosen to view the hot take away food sector as a whole, when in reality there is a world of difference between the fish and chip shop and the large chain outlets, in as much as we are a manufacturing food industry, trading at recognised meal times, serving a highly nutritious meal at such a reasonable price, that it constitutes part of the staple diet of countless thousands of low income groups.
The association knows where its market lies. Why did the Government not know where their market lay when they introduced this savage surcharge?
The Hot Take Away Action Group has also used strong words—it is strong language from an organisation that cannot be said to be a bastion of support for the Labour party. It says:
It is very likely that all adults in a low income family will go out to work if they are able to. The consequences of this on the family's eating habits is profound and has never been properly researched.
Whereas in the 1950s children would expect a hot lunch at school and a hot supper cooked by their Mother in the evening, many children nowadays are expected to find their own lunch and sometimes also dinner and may be given a small sum e.g. 50p with which to purchase a hot meal. In the absence of cooking experience or access to cooking facilities this will usually come from a take-away.
That national organisation knows that young school children in low-income families will be directly affected by the imposition of this stupid surcharge on fish and chips.

Mr. Don Dixon: I agree with my hon. Friend's point about fish and chips. Is he aware that in my constituency many fish and chip shops sell pies and other food which are heated up and taken away? Under the legislation, if I go into a fish and chip shop and buy a heated pie to take away I shall pay 15 per cent. VAT, but if I buy a pie from a confectioner's shop, I shall not pay 15 per cent. VAT because it was not heated specifically for take-away purposes. That is one of the anomalies of imposing 15 per cent. VAT on take-away food.

Mr. Campbell-Savours: My hon. Friend draws the House's attention to the minefield of confusion that the measure introduces. The Government must dismantle the damage and remove the anomalies and confusion that the Opposition foresee.
According to the study, jobs will inevitably be lost. The Preston and District Fish Friers Association states:
Customer re-action to the budget has resulted in a sustained drop in trade. This, coupled with the recent increases in the prices of potatoes and frying fat, will certainly have an adverse effect on jobs. Most of us employ at least five workers whose jobs are now in jeopardy.
The imposition of the tax puts jobs in jeopardy.
Kentucky Fried Chicken Limited has been most forthcoming in the brief and document that it sent to hon. Members, which sets out the problems confronting it. It states that 70 stores with a weekly turnover of less than £3,000 will close, with the loss of 700 jobs, and that 420 jobs will be lost in stores that would be kept open. It forecasts a corresponding reduction in food paper bought from the paper and board industry of about £7·5 million a year. It is unable to quantify the number of jobs that will be lost in that industry.
Taken collectively, that will cost the Exchequer £3·1 million. The Treasury's assessment of the VAT receipt from Kentucky Fried Chicken is £8 million, yet Kentucky Fried Chicken calculate that, after the closure of 70 stores and the loss of 1,120 jobs, it will be only £3·3 million. That is substantially less than the Chancellor of the Exchequer's calculations and the modified calculations, which were published in a national newspaper this morning. The Government have not done their homework properly.
The public should not be duped. The money is being taken to subsidise tax cuts for the better off. However, the Government may not find the cash necessary for those tax

reductions. The House must consider the possibility of tax evasion. Traders will find ways of evading the tax—they are already considering them. Many traders who currently produce accurate returns for the Inland Revenue will use this opportunity to muck up the present arrangements, under which the Inland Revenue assesses a chip shop's takings. Chip shop owners told me that they are assessed because the Inland Revenue is unwilling to accept their returns. They will use this opportunity substantially to reduce their declared takings, and the Inland Revenue will find it difficult to prove that those reductions are not taking place. That means that the Inland Revenue's income tax take will fall correspondingly. Have the Government costed that or built an assessment of it into their calculations?
5.15 pm
It has been suggested that traders may set up spurious mobile rounds to split their business between mobile and fixed point sites and thus keep within the £18,700 registration threshold for VAT. That will give them a joint VAT threshold of £37,400, which is £700 a week. The Thornton Baker study shows that 9,000 of those whom they interviewed are low turnover traders, and they may well, by a system of splitting their businesses between mobile rounds and fixed sites, be able to arrange their affairs to avoid VAT payment.
In reply to a parliamentary question, the Government said that only 12 inspectors would be appointed to deal with this additional tax. That is rubbish. Twelve inspectors will be insufficient. The Government have not taken account of the increased civil servants required both in the Customs and Excise department, where they are responsible for VAT collection, and in the Inland Revenue, where they will have to carry out investigations into fraudulent activities, which will inevitably develop among small traders.
In his reply the Minister may say that my comments are an insult to the industry, but its spokesmen have made those points themselves. They are not policing it, but representing it and they know its strengths and its weaknesses.
The clause is silly and wholly unnecessary. On Second Reading I did not unequivocally and unconditionally oppose the Bill, but expressed, honestly, my support for a number of its provisions. However, this clause is wrong. The Minister knows that it is wrong, the country knows that it is wrong and the industry knows that it is wrong. By now hon. Members should know that it is wrong, and should vote against it.

Mr. Den Dover: Today is a sad one for the Conservative party. The measure shows that we are out of touch with small businesses and with the service sector, which is so important. The hon. Member for Rochdale (Mr. Smith) pointed out that we are completely out of touch with the traditional way of life in the north-west, where fish and chip shops and hot take-away food are part and parcel of the existence of many people.
The public see the sense of paying 15 per cent. VAT when food is consumed on the premises and of not paying it when food is taken away. During the next few weeks we should consider the complete jumble of arrangements that will come to exist. People will no longer have the clear choice of consuming on the premises and paying VAT or taking food away and not paying VAT. What will they do if they want hot fish and chips and a cold drink, as people


often do? Will there be two tills so that they can pay VAT on some goods and not on others? People do not want complicated lives. Nor do small buinesses—they want quick, in-and-out business. The customer wants to come in—he often has to queue long enough for fish and chips—exercise his choice, and get home with the hot food while it is hot.
I cannot underestimate the damage that this measure will cause to the image of the Conservative party and the Government in areas such as mine, because the recession is still hitting my area. In those areas where people rely on hot take-away food they will wonder about the Government's performance and will look badly on such a measure. The proposal also shows that we have no idea about the fish and chip business, because there has been an enormous reduction in trade: first, because the price of potatoes has increased two or threefold in real terms; secondly, because the price of fat has increased; and, thirdly, because the price of fish has increased during the past few years. Why have the Government suddenly chosen to tax a source of food for pensioners, students and the unemployed?
Today I have no hesitation in voting against the Government. pay tribute to an excellent, uncharacteristically restrained speech by the hon. Member for Birmingham, Perry Barr (Mr. Rooker), and to an excellent speech by the hon. Member for Rochdale, who knows his onions and who knows that people in the north-west will be amazed and dismayed by this measure.

Mr. Bell: I congratulate the hon. Member for Chorley (Mr. Dover) on a courageous and practical speech in outlining the difficulties which the Government will face when they try to introduce the tax. It is an honour to the House to hear speeches such as those we have heard this afternoon. My hon. Friend the Member for Workington (Mr. Campbell-Savours) said that this series of speeches is essentially cosmetic because the Government have made up their mind. However, if the public and our constituents who have written to us could have heard the speeches of my hon. Friends the Members for Birmingham, Perry Barr (Mr. Rooker), for Normanton (Mr. O' Brien) and for Workington, and that of the hon. Member for Rochdale (Mr. Smith), they would believe that we have right on our side and that we might at the end of the day seduce the Government into changing their mind on this clause.
I am reminded of an earlier Chancellor of the Exchequer who was cut down in his prime—Iain Macleod—who in the long years in opposition prepared the Tory strategy from 1970 onwards. The 1970 Conservative manifesto stated that the Conservative party, when in government, would introduce VAT, but it also stated clearly that they would not introduce VAT on food. It was Mr. Macleod who said that the first reactions to a Budget were invariably wrong. I remembered that when the Chancellor of the Exchequer made his Budget speech and there was a great waving of Order Papers from the Back Benches behind him. The City was quick to realise that the Budget was not what it was made out to be, and when the banks and business houses ran the Budget calculations through their computers they discovered than many of them would come within the range of corporation tax, whereas previously they had avoided it.
Although the Stock Exchange continued to be in rapture, there was marked resentment in the take-away food sector. One reason why that sector was less than

overjoyed, but the Stock Exchange was overjoyed, is that few take-away businesses—such as members of the National Fish Friers Federation or the Take-Away and Fast Food Federation—are quoted on the Stock Exchange. I doubt whether many of them are quoted on the over-the-counter market as unlisted securities.
The Conservative party's commitment not to impose VAT on food was repeated in the 1979 manifesto. It said that there would be no VAT on food, fuel, housing and transport, but that was quietly dropped in the 1983 manifesto. We are now seeing the reverse of the doctrine of mandate; because it was not mentioned in the 1983 manifesto, it is now in order to widen the VAT base by imposing it on take-away food.
As Conservative Members said, in 1974 my right hon. Friend the Member for Leeds, East (Mr. Healey) introduced VAT on a range of items, including ice cream, confectionery, soft drinks and crisps. The Chancellor referred to that in his Budget speech in March. Indeed, when my right hon. Friend increased VAT on a range of electrical goods he was criticised because it was thought that the increase would attack the employment prospects of those who worked in electrical industries. That criticism was made by the present Prime Minister and others, and we could make a similar criticism of the proposed tax on take-away food. It will attack employment in the take-away food industry, and we wish to bring that fact to the attention of the wider public and to impress it upon the mind of the Chief Secretary to the Treasury.
We heard today that there will be a temporary reduction in consumption, but that it will recover later. However, we have been led to understand that the reduction in sales of hot take-away food will be between 14 and 20 per cent. That will lead to serious losses to family businesses, and the industry might decide to shed labour instead of absorbing the losses, which will add to the dole queues.
If, as has been said, the national insurance surcharge was a tax on jobs, so is VAT. VAT added needlessly, as in the present case to hot take-away food, is a tax on jobs and will affect not only employees in that industry and ancillary industries, but the expansion of this service industry. It may not be a sunrise industry, but it is a service industry, and we have heard much about how the Government wish to help service industries and small businesses.
The hon. Member for Rochdale made great play of the fact that the Government have not helped the small business man since 1979. When I was the candidate for Hexham in the 1979 election, I tried to tell small business men in the area what Labour had done for them between 1974 and 1979, and how a Conservative Government would affect their businesses. Their problems have continued, and last year bankruptcies of small businesses were greater than they have ever been. The attack on small businesses is continuing little by little, and the imposition of VAT is another attack on the viability and profits of the small business man and his clientele.
The Chancellor of the Exchequer said that the revenue from VAT on hot take-away food and drinks was likely to be £125 million in 1984–85, and £200 million in a full year. However, the industry takes a less sanguine view. It believes that the revenue raised in a full year is likely to be £172 million, or even as little as £160 million, and we heard today of the practical complications for the VAT man, who must decide whether the food sold in a fish and chip shop or an Indian or Chinese take-away can be


described as hot or cold in accordance with the ambience definition. The clause is likely to lead to traders switching to selling cold food, and there is likely to be pre-registering by splitting fish and chip shops into two businesses and thereby trading below the £18,700 VAT threshold.
Scorn has also been poured on the theory that only 12 additional staff will be required to oversee all the possible ramifications and to rule accordingly. Given that we are a nation of 60 million people, given the number of hot take-away outlets throughout the country, and in view of the ramifications that will arise as a result of this provision, who in his right mind can believe that only 12 additional staff will be required? That is illogical, both politically and mathematically.
5.30 pm
The Chancellor said that this would be a radical, tax-reforming Budget. He declared that his proposals were guided by two basic principles. The first was the need to make changes that would improve our economic performance over the longer term. The taxing of take-away food from the local fish and chip shop or the local Chinese or Indian restaurant will hardly achieve that.
The second purpose of the Budget arose from the Chancellor's desire to make life simpler for the taxpayer. It will be simple indeed with regard to take-away food, because the low-paid, students and those on the dole in receipt of supplementary benefit will be forced to pay more. As the hon. Member for Rochdale said, this is a tax on the consumer. It is non-recoverable. It will hit the pockets of the lowest paid, who will be unable to offset it. It will therefore be a tax on living standards.
The Chancellor also referred to competition, and my hon. Friend the Member for Perry Barr asked the right hon. Gentleman to state exactly what competition he was referring to. In his Budget statement the Chancellor said:
Take-away food clearly competes with other forms of catering, and I therefore intend to bring into tax hot take-away food and drinks".—[Official Report, 13 March 1984; Vol 56, c. 303.]
If, however, the Chancellor is worried about competition, why does he not bring into the same tax net pies that are sold in a bakery? As my hon. Friend the Member for Jarrow (Mr. Dixon) said, a person can buy a hot pie at a take-away and pay 15 per cent. VAT, but if he buys a similar pie in a bakery down the road, he will not pay VAT.

Mr. Maxton: In the main my hon. Friend is correct, but if the baker sells that pie from a hot cabinet it will be subject to 15 per cent. VAT.

Mr. Bell: I am grateful to my hon. Friend for that intervention. In response to a written question the Chancellor has said that the pie from the bakery will not be subject to VAT because it will not be eaten warm when taken home. The fact still remains that, in proposing to tax take-away food through VAT, the key phrases used by the Chancellor were "competition with other outlets" and "forms of catering". My hon. Friend the Member for Perry Barr and the Committee will await a reply from the Chief Secretary on this point.
As the hon. Member for Rochdale also said, once a tax is introduced it is difficult to remove it. Over the years, under both Labour and Conservative Governments, we have seen a widening of the VAT base to encompass more

and more items. My hon. Friend the Member for Workington reminded us that the Chancellor has said that at the present time he does not intend to tax food generally. We cannot foresee the contents of next year's Budget, although we can predict an extension of indirect taxation as part of the Government's strategy. It is clear to me that under this Government VAT will become a universal tax on everything that we buy. By making it a tax on consumption, the Government will then be able to reduce direct taxation later on.
The Chief Secretary has said that this Budget contains a modest shift in balance from income tax to VAT and that VAT is neither a tax on the poor nor a tax on necessities. We believe that under this Government it will become both.
The Chancellor has said that there will be no let-up in the Government's determination to defeat inflation. They are fighting inflation by attacking the living standards of those who rely on fast foods and on a hot take-away meal as part of their staple diet. Those people will understand that the defeat of inflation will be paid for from their pockets. We have already heard of those who rely on such foods—students, school children, old-age pensioners, those on low incomes and the unemployed. The extra will come out of their pockets, and this provision will be a tax on them.
Much has been said of the errors that were made in the presentation of the various rates of VAT throughout the European Community. We have heard about the confusion that arose as a result of a tax on hot take-away food and a tax on food eaten on the premises. In Europe, there is a multi-rated VAT system under which it is possible to vary VAT on certain items. That has happened in other European countries. VAT has been reduced on hot take-away foods, and a different VAT rate applies to food eaten on the premises. For doctrinal reasons, however, this Government are opposed to anything other than a standard rate of VAT. If there were a graduated rate, the burden would be lighter on the hot take-away outlets that will be forced to charge VAT in 24 hours' time.
That is the subject of another of our amendments. If these provisions cannot be removed from the Bill, we should like to see them introduced gradually. The Government propose to introduce the tax in one fell swoop, and the full burden will fall on the consumer from 1 May 1984.
We also criticise the Government for introducing taxation without consultation. We accept their apology for the fact that the figures published in Hansard of the varying VAT rates in other countries are wrong. That begs the question, "How many other facts on which the Government have built their case for VAT on hot take-away food are also wrong?" This is an ill-conceived tax. It will not be properly understood by the public, let alone by the trade. It is a consequence of the lack of consultation prior to the introduction of the proposal.
I shall now refer to a letter from a company which has a franchise from Kentucky Fried Chicken (GB). This company has several sale outlets, and it has written to me saying how extremely concerned it is about the effect that VAT will have on the hot take-away food industry in general and on its business in particular.
The company was set up some 12 years ago, in true entrepreneurial style, by two members of the family. Since then, the letter says:
Our staff have worked hard, long and loyally over the years, and we are proud to say that many of them have worked for us for as long as ten years. They, like us, feel strongly that our livelihoods are suddenly threatened by an ill-conceived tax.
The letter goes on to describe the company:
As a Company we employ between 150 and 170 personnel. If the tax hurts us as seriously as we expect there will be redundancies in our shops. Furthermore, the future of our meat factory, where we employ 40 personnel, could be in jeopardy. The business of our factory is mainly in cutting chicken for our Kentucky Fried Chicken shops and supplying the fast food industry in general. If sales within the industry are affected, it will mean without question the loss of jobs in our factory.
It goes on to make another point, which I draw to the attention of the Financial Secretary. It says:
We were planning a small expansion programme which would have created an additional fifty jobs. This will now have to be set aside until we can see the genuine effect of VAT should it be imposed.
From our debates we can draw the conclusion that VAT is likely seriously to impair growth in the take-away food industry, which is a service industry. It will damage the employment prospects for young people. I understand that 50 per cent. of all Kentucky Fried Chicken employees are under 25. This organisation was planning to introduce more than 300 new shops which would have created more than 10,000 new jobs. Instead, as many as 70 of the Kentucky shops will be faced with closure, with more than 1,000 job losses. All this will have a knock-on effect on suppliers and ancillary services. Therefore, what the Government are doing will affect small businesses, and we can see the effect that it will have on this part of the service industry.
All this is taking place because the Government place the emphasis on raising money to offset income tax cuts. They cannot finance the income tax cuts with an expanding economy and a strong productive base, because they have built into their equation 3·5 million unemployed. To finance that they must widen the VAT base to take in this new tax on hot take-away food. The Government are making a serious error of judgment in bringing in this tax at this time and in this way. I hope that the Government, through the Chief Secretary, will take note of the opposition from both the Labour Benches and the Benches behind the Treasury Bench, and accept our amendment.

Mr. Gerald Howarth: While I did not agree with the conclusions reached by the hon. Member for Middlesbrough (Mr. Bell), I found his interest in maximising profits a welcome sign from the Opposition Benches. We look forward, during the passage of the Bill, to hearing more from them on the need to maximise profits, because that is what leads to greater employment.
As the hon. Member for Rochdale (Mr. Smith) said, there is genuine concern about the tax because many take-away food shops are run as small businesses and are part of the small business community. All of us, whatever part of the country we represent, have fish and chip shops and other hot take-away food shops in our constituencies. They are small businesses. We want to see them thrive, and we are concerned that they should do so.
However, while it is true that many of these shops are small businesses, there are still a number of multiple chains run as franchises but which are substantial companies, such as the McDonalds chain, which is one that I and my family frequent from time to time. [HON. MEMBERS: "Hear, hear."] I am delighted that other hon.
Members also frequent McDonalds. I assure the House that I am not in receipt of any pecuniary benefit from that company.
5.45 pm
I have often felt, when going into one of these shops, that there is something of an anomaly in the arrangements whereby there is one price if one eats the product there and another price if one takes it away. For a long time I was under the misapprehension that the extra cost was for seating, lighting and so on. There is no charge for a knife and fork, because there is no knife and fork. The extra is the VAT for eating in. Those who buy their food to take away will be justified in paying the 15 per cent. extra, or there is an anomaly.

Mr. Austin Mitchell: rose—

Mr. Howarth: I shall not give way as I wish to be brief. I know that the hon. Gentleman wishes to make his own speech, and I am sure that he will have the opportunity to do so later, so I shall not give way now. There is nothing unsound in the principle being advanced by the Government in this case. It is an anomaly that should be sorted out.
I represent a midlands seat, and I assure the hon. Member for Rochdale that fish and chip shops are as much a part of our way of life as they are in the north. They are part of the way of life of all Britain. I cannot conceive that what is viewed by many as a national institution will be deserted on the grounds that 15p in the pound will be put on as a VAT surcharge. I eat fish and chips.
I derive my evidence for my view from the fact that I went into fish and chip shops in my constituency—not all of them—and took a straw poll of the customers there. I had not notified the proprietors in advance that I was coming, as perhaps I should have done. I asked the customers, "When 15 per cent. VAT is introduced on 1 May, as the House in its wisdom will endorse this measure, will you continue to consume fish and chips, or will you be put off by the 15p in the pound increase?" One has to bear in mind that in my area a piece of cod arid a portion of chips cost about £1, and that will go up to £1·15. Few people there said that they would stop buying fish and chips.

Mr. Ron Lewis: How many were there?

Mr. Howarth: There was a long queue of customers.

Mr. Austin Mitchell: rose£

Mr. Howarth: I shall give way, but only if the hon. Gentleman makes a short intervention.

Mr. Austin Mitchell: Does the hon. Gentleman accept that a survey, not limited to one fish and chip shop, shows that of those who were asked whether they would buy less take-away food as a result of this taxation, of the social group DE 57 per cent. said they would buy less, of the unemployed 67 per cent. said they would buy less, of retired people 60 per cent. said they would buy less and of students 67 per cent. said they would buy less?

Mr. Howarth: I prefer to take my own analysis of people in the shops, not that of people drawn at random from the streets who probably do not eat fish and chips. I did not go to just one fish and chip shop. Some of those whom I asked were unemployed and others fell into the categories that the hon. Gentleman mentioned.

Mr. Ron Lewis: I am following the hon. Gentleman's argument. I was in his constituency on Easter Monday visiting relatives. I assure him that what he is saying now is different from what I was told then.

Mr. Howarth: It was a rare privilege for the hon. Gentleman to be in my constituency. Had he informed me that he would be there, I should have been delighted to have offered him a cup of tea, with or without fish and chips. Perhaps when he next comes he will be kind enough to let me know, and I shall be delighted to repeat my invitation.
I freely accept that difficulties face the industry. The hon. Member for Middlesbrough mentioned the increase in potato and fat prices. The industry is undoubtedly finding it difficult. However, people will continue to buy fish and chips, despite the opinion polls from which the hon. Member for Great Grimsby (Mr. Mitchell) quoted. Fish and chips are fundamental to the way of life of people right across the spectrum. I cannot conceive that they will be put off by an increase of 15p in the pound. There is evidence that the fall in trade immediately after the Budget, when people were mistakenly under the impression that VAT had been imposed immediately, is beginning to pick up a little, and I believe that it will settle down in due course.
I must confess to feeling some disappointment that Labour Members feel that the imposition of VAT on take-away foods is an extension of the class war that does not exist and that this is somehow an attack on working people. People from all walks of life in Britain eat fish and chips. This measure is not an attack on any particular group. It is an attack on nobody. It is a welcome development that our Budget strategy should be less reliant on the taxation of income and more reliant on the taxation of spending. That is what the British people want and that is one reason why they voted so strongly for the Conservatives in 1979 and again in 1983.
It is worth pointing out, as I have done to the people in the long fish and chip queues in my constituency, that, thanks to the Budget, 850,000 people will be taken out of tax altogether. That surely will be welcomed by the Opposition. In addition, the increase in income tax thresholds is about £2 a week. I am sure that out of that there will be help for those who are reliant on fish and chips. I accept that there are people who eat fish and chips five times a week, although that cannot be healthy or cheap. Cooking at home with the usual materials is often a much cheaper way to eat than buying fish and chips. The £2 a week that the average taxpayer will be gaining from a lower tax take will be more than sufficient to compensate even the heaviest fish and chip and other take-away food consumer.
It is no good simply being in favour of the good parts of the Bill, such as the reductions in taxation—the giveaway bits—and not being prepared to bite on the bullet. Labour Members may think that the investment income surcharge is a better way to adjust the taxation system. I support wholly, entirely and with enthusiasm the abolition of that because it is a penal double tax on those who have saved for their retirement.

Mr. Austin Mitchell: The Government are taking from the poor to give to the rich.

Mr. Howarth: That is a not so. That is a completely unfounded—indeed, most ungenerous—remark to make.
Many who have saved for their retirement are making sure that they are not a burden on the state. Therefore, they are not calling at our surgeries with problems which we, as Members of Parliament, have to sort out. While nobody likes extra taxation—I do not particularly like this one—if, in the overall strategy, sums have to be raised fom somewhere, this measure is as logical as any by which to raise it.
In support of my contention that most of the British people will continue to buy fish and chips and other take-away foods, as they have done in the past, I hope that hon. Members will join me in continuing to patronise fish and chip and other take-away food shops in our constituencies. After all, our way of life leads us to find this a convenient form of food. I hope that we shall demonstrate our conviction that we should support those profitable small businesses, and set a good example to our constituents.

Mr. Maxton: I agree with the hon. Member for Cannock and Burntwood (Mr. Howarth) on the last point only. As busy Members of Parliament we should perhaps declare an interest as users of take-away restraurants in some form or another. I certainly am. The hon. Member for Croydon, South (Sir William Clark) shakes his head. I assume that he is not one of those who uses take-aways. I am a regular user of fish and chip shops, Indian and Chinese take-aways, and even the baker's shop. When we go home late after a busy day we do not want to arrive home either to cook for ourselves or to ask our wives to do so. Therefore, we buy some form of carry-out to eat when we get home.
That is at the core of the misconception around which the tax is based. The tax is based on the concept that takeaway food is an extension of the catering industry and that there is competition between the take-away restaurant and the restaurant where one sits down. That is fundamentally wrong. That is not what take-away food is about. Take-away food is bought in place not of taking one's wife or kids to a cafe for fish and chips but of sitting down to a meal cooked at home. If the Chancellor of the Exchequer and the Chief Secretary feel that there is competition with other small businesses, such as restaurants, they are wrong. The take-away food businesses are competing with those who provide fast foods, such as frozen foods. In other words, take-away foods compete with the supermarkets. People use take-away food not instead of going to a cafe but as a replacement for meals in their homes.
One small section of my constituency relies almost entirely upon fish and chip and other take-away food shops. They are the very poor whose electricity supply has been disconnected and whose houses have no other source of energy. They can obtain food only from a take-away food shop, because they have no means of cooking in their own houses. Many are single-parent families, and the only hot meals the young children get may be take-away meals. It is the poor who are hardest hit by VAT on take-away foods, particularly on fish and chips. It affects old-age pensioners, students and schoolchildren. It is an anomaly that the Government, who have been forcing up school meals prices, closing many school kitchens, and forcing children out into the take-away areas to get their food at lunch time, are further increasing the prices charged to these children. It is the very poor who are being hit, because they suffer most from unemployment. For those reasons, I support my hon. Friend's amendment.
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I wish to make one specific point that I raised earlier with my hon. Friend the Member for Middlesbrough (Mr. Bell) on the question of bakery shops which provide hot food. An anomaly exists here, which the Treasury will have to resolve. During the general election most of us—except perhaps the hon. Member for Croydon, South—relied probably even more than at any other time on take-away food. In my committee rooms, we rarely stopped to go and eat a meal in a restaurant. Members of the SDP probably go and sip claret for half the night, and that is why their candidates do not win as many seats as we do. During the general election, in my constituency, I often went to the baker's shop at lunch time to buy for myself and my workers, who contributed towards the cost, take-away food.
The baker's shop to which I refer is part of a fairly large chain which has a franchise. It has two parts: the shop where it sells cakes, bread and suchlike—not hot food, but normal baked foods—and a separate counter where it sells hot pies, made-up sandwiches, rolls and food of that nature. In particular, it sells what is a traditional Scottish food—the hot mutton pie. It is almost unheard of in the south of England, and is rare even in the north of England. It is the round, flat Scottish mutton pie. It is sold in bakers's shops hot, and specifically from a hot cabinet. It does not remain hot from baking, but it is sold hot specifically. Such bakery shops normally have two tills: one for the normal bakery foods and the other for the take-away food of sandwiches and hot pies. If such shops are to arrange their affairs properly, they will have to have three tills: one for the sale of cakes and bread, the second for made-up sandwiches and rolls, and the third for hot mutton and other hot pies, because they will be VAT-rated, whereas the rest are not.
Most of these bakers' shops charge the same price, whether for cold food or for food from the hot stands. In future they will have to charge a different price for food from the hot stand. They will have to charge 15 per cent. extra on hot pies as against cold food from the shop. Would it be tax evasion if they sold all their pies cold to the customer, and provided a service whereby the pies could be heated free after they had been sold and the money handed over? Arguably, that must be the case. If during the morning a shop sells out of the cold pies for sale to the customer to take away and heat up at home, and a customer comes in to buy pies to take home and is told that there are none left but that there are some hot pies in the hot stand, what will happen? Will the shop be entitled to take the pies out of the hot stand and sell them as normal pies, or will it still have to charge 15 per cent. extra? In the present situation, the shop will have to charge the 15 per cent.
At this point, it is arguable that the first VAT on basic foodstuffs will be introduced. In a sense, this is a tax on basic foods anyway, but I think that this tax will now apply in the baker's shop. I do not think that most bakers will charge prices 15 per cent. higher for food from the hot ovens and hot stands only. I believe that they will increase the prices of all their pies, not just the hot ones. If they do not do that, anomalies will be created. If they do that, the normal cold pie will be taxed. This may not be direct taxation, or a tax that the Chancellor of the Exchequer wishes to impose, but it will be a tax. That is the kind of anomaly that the legislation creates.
In Scotland, it is traditional at lunch time to buy foods to take back to small factories without a canteen. Surely it is an anomaly to have a tax on hot pies, but not on sandwiches which are ready made up and sold from the shop. They are all take-away foods. Why is one taxed and the not? These anomalies are so great that it does not make sense for the Chancellor of the Exchequer and the Chief Secretary to continue with this proposal. It would make sense if they were to consider withdrawing it rather than having it imposed on 1 May.

Mr. Fisher: The House has heard a wide variety of speeches from Conservative Members, ranging from the coherent and courageous speech of the hon. Member for Chorley (Mr. Dover), who said that he would vote with the Opposition for the amendment and against the Government, to the critical and interesting speech from the right hon. Member for Blackpool, South (Sir P. Blaker). I was unclear whether the right hon. Gentleman would join us in the Lobby to support his criticisms. I hope that he will follow the logic of his own logical and courageous speech.
We also heard a bizarre speech from the hon. Member for Cannock and Burntwood (Mr. Howarth), who introduced a new concept not only in scientific market research by going into his local chippy, but, as I understood his speech, in political canvassing. He appears to have harangued his constituents on the benefit of the Budget's application to the poverty trap. If that is the way that he behaves towards his constituents, it makes me optimistic that we shall regain the Cannock and Burntwood constituency at an early opportunity. However, the response that he received in his Cannock chippy was hardly surprising. If he is correct in saying that he was in a chippy charging £1 for fish and chips, or just fish, it is no wonder that those constituents—

Mr. Gerald Howarth: This occurred in Burntwood rather than in Cannock. The hon. Gentleman will appreciate that Burntwood and Cannock are parts of my constituency. The price was inclusive for the fish and the chips. It may have been £1·05. I was talking in round figures.

Mr. Fisher: I know Burntwood and I thought that I knew most of the chippies there, but it is obviously a very classy chippy indeed that charges £1 or £1·05 for fish and chips. It is no wonder that people who go to that sort of chippy are not really worried by an extra 15 per cent. The chippy at the end of the street where I live charges 55p for fish and 24p for chips. Those of the hon. Gentleman's constituents in Burntwood or Cannock who are worried—as many of them, especially in the mining industry, will be, because they are worried about where they are going to get their hot meals from—should go to less grand, less posh, fish and chip shops round the corner.

Mr. Howarth: The only concern of miners in my constituency is that they should be left to decide in their own way whether to work. My constituents wish to continue working so that they can still afford to pay for their fish and chips.

The Second Deputy Chairman of Ways and Means (Mr. Paul Dean): Order. The subject under debate is take-away foods.

Mr. Fisher: No doubt the hon. Gentleman will continue his political harangues in fish and chip shops, where he can make them to miners on the subject of VAT.
It is right that we should begin our debates with clause 10, because it extends VAT and indirect taxation. In a very real sense, this Budget is a take-away Budget for most people in this country, and certainly for those on below average earnings. It involves an unhappy, and socially and economically unjust, extension of indirect taxation, and we fundamentally oppose it. It is also an extraordinary extension of VAT. A few weeks ago, the Chancellor of the Exchequer stood at the Dispatch Box and claimed that the Budget was radical and reforming, yet the money for such radical reforms—which will certainly be exposed during the week, and in Committee upstairs—is to be raised by taxing fish and chips. What a squalid, ignominious and feeble base. How dare the right hon. Gentleman claim that it is a radical, reforming Budget when it is founded on a tax on fish and chips? That is ridiculous, and we look forward to making a meal of the Chief Secretary's attempt to justify this squalid little clause.
The clause is ill-considered and, as my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) made clear in his excellent speech, based on a false premise. I hope that the Chief Secretary will make clear to us what facts he and his officials were working on when they decided that VAT should be extended to fish and chips. Will he make clear to the Committee whether he was working on the facts that he gave in reply to a written question, or whether, alternatively, that question was wrongly answered? As my hon. Friend the Member for Perry Barr said, the Minister apologised for misleading the House in that written reply, but the crucial factor is not whether an apology was given, but whether those were the statistics that he was working on when he decided to extend VAT. If they were, he must admit that he was working on the wrong statistics, that his information was wrong and that the whole basis for extending VAT was wrong.
I hope that the Chief Secretary will give me his attention for a moment, because I want him to tell us what statistics he was working on when he decided to impose VAT. Will he confirm that he was working on the wrong statistics, which were given in that written reply? That is an important point, and I believe that it must make it extremely embarrassing for the Chief Secretary when trying to justify this extension of VAT. The legislation is ill-considered and, as has been said, it has been drawn up without consulting the industry or other groups in the country. In addition, it is a thoroughly misguided extension of VAT, even on the Government's own criteria. As my hon. Friend the Member for Middlesbrough (Mr. Bell) and the hon. Member for Rochdale (Mr. Smith)—who made an excellent speech—made clear, the Bill is an attack on small businesses. There are 19,256 take-away outlets, and the vast majority of them are small businesses.
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We heard a lot of rhetoric during the election about the fact that the Conservative party claimed to be the party of small business. But now we see the reality of those boasts and protestations. The Government are attacking a great many small businesses—nearly 20,000 of them. The legislation is also an attack on the businesses of the ethnic minorities, because almost half of those take-away outlets

and small businesses are run by them. There are 2,000 Indian and Pakistani take-aways, 6,000 Chinese take-aways and more than 500 Greek and Cypriot kebab houses. That accounts for 8,500 of those outlets. In addition, many ordinary fish and chip shops are run by Chinese people. Indeed, the one at the end of my street, called the Hi-Fri, is run by a very fine Chinese family who produce excellent English fish and chips.
Thus, the legislation represents an attack on the ethnic minorities, because a great many people in the Chinese, Indian and Pakistani communities have started up businesses and are making a success of them. The Bill is a direct attack on them and makes nonsense of the Government's protestations about helping the ethnic minorities, particularly the small business men among them.
The legislation is also a direct attack on labour-intensive businesses. For example, Kentucky Fried Chicken, which has 5,000 employees, saw a 40 per cent. growth in the last year alone. The company claims to have as many as 10,000 jobs in the pipeline, but those jobs will now be frozen pending consideration of the impact of extending VAT. On my calculations, that amounts to about 10 employees per outlet. In most fish and chip shops the average is probably three to five employees per shop.
No one has been clear about the employment situation, but the industry directly employs about 80,000 people, quite apart from those who work in industries that service the take-away outlets. That is a very large employment market. If, as I believe the hon. Member for Chorley suggested, one or two people are likely to be laid off in many of those outlets, 20,000 even 25,000 people must fact the possibility of losing their jobs. That is an awful lot of people for one small clause in a Finance Bill.
I urge the Chief Secretary to tell us what consideration he gave to the consequences for employment of extending VAT, and what statistics he was working on. I am sure that he considered the employment aspect, but perhaps he will tell the Committee that he did not have any figures for the impact on employment of extending VAT. He must answer the question directly. Did he have figures for the impact on employment? If so, what were they? If he says that he did not, or does not, have any figures, we are faced with the extraordinary but not very edifying spectacle of a Chief Secretary and a Treasury team implementing Budget recommendations without the slightest thought about the consequences for employment. If he has those figures, the Committee will be interested to hear them and to know whether they square up with my admittedly amateurish calculation. The legislation could affect the jobs of as many as 15,000, 20,000 or even 25,000 people. However, we shall wait to hear what the Chief Secretary has to say about the employment figures that he was working on.
The provision attacks the one-man entrepreneur who wants to start in the catering industry. One of the few ways that a person can get into the industry is by opening a take-away shop, which he may or may not be able to expand, either through a franchise or by purchasing a corner shop of his own. It is an expensive game, because a chip shop, even on a non-city centre site, can cost up to £60,000. The Government are attacking labour-intensive businesses, small businesses and the ethnic minorities when they attempt to make a go of a business.
Why are the Government doing that? The answer is in the Government brief which many of us have received.
The turnover of the industry is said to be £1,145 million a year. When the Chief Secretary and the Chancellor saw that that sum was involved, they must have been tempted to get their fingers on some of it.
The Government are attacking the people whom they always claim to support. They are attacking the people whom Tory Members in their election speeches promised to help. Little did they think when sincerely they made such fine-sounding speeches about helping the small entrepreneur that less than a year later the Chancellor would be asking them to troop like sheep into the Lobby to vote against the small business man. I fear that that few Conservative Members will be as courageous as the hon. Member for Chorley and stand by their criticism and join us in the Lobby. I wish that more Tory Members had the courage of their convictions and that, even if for different reasons, they would join us in the Lobby tonight. I suspect that they will not do that.
We are told that the take from the £1,145 million turnover will be £200 million a year. How can that be so when 15 per cent. of that turnover is only £171 million? That turnover includes revenue from some cold food and some non-ambient food, some applies to outlets with turnovers below the VAT registration limit, and some outlets will become bankrupt. The actual take from the turnover will be less than the £171 million, which I suggest, and a great deal less than the £200 million Government figure. I shall be interested to hear the Chief Secretary explain how he arrives at the figure. He may be making allowances for inflation, but even that does not produce that sum. I think that the Government's real take will be no more than £150 million, and it could be less.
My hon. Friend the Member for Perry Barr, in an excellent speech, totally destroyed the two reasons that the Chancellor gave in his Budget speech for the introduction of VAT on take-away foods. The Chancellor argued that take-away establishments were in competition with restaurants and that we were out of step with the rest of Europe. Those arguments have been demolished this evening. If the Chief Secretary can pick up the fragmented pieces, he will be doing a good job and earning his fish and chips.
It is nonsense to say that fish and chip or any take-away shops are in competition with restaurants. For the Chancellor to say that they are shows his complete ignorance about who uses fish and chip shops, when and why they use them. If the Chancellor were in his constituency at dinner time on a school day, he would see local comprehensive school children trooping into fish and chip shops—unless his constituency is different from any other.
Schoolchildren go to the chippy to buy hot chips. Do they ask themselves whether they should go to a restaurant or to the chippy for a bag of chips? Of course not. To say that schoolchildren make a rational choice between a restaurant and the chippy is nonsense. The same applies to working mums when they arrive home from work, if they are lucky enough to have a job. If they do not want to cook a meal, do they consider whether they will take their husbands and kids out to a restaurant or to the chippy? The chippy is not in competition with the restaurant. As my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) said, fish and chip and other take-away shops provide a convenient alternative to home cooking but not to restaurants.
We have received some interesting material from the Hot Take-Away Action Group on behalf of Kentucky Fried Chicken and the large burger chains. Much of the evidence is pertinent, and we are grateful to those organisations, but much of their comment misses the point. A majority of outlets are fish and chip shops which cater for a different market. Perhaps pizza joints, kebab houses and burger shops, to a limited extent, are in competition with restaurants, but that is not true of fish and chip shops, except possibly in the case of the grandiose fish and chip shops in the Burntwood and Cannock region.
We must examine in detail the social effect of the proposal and its effect on businesses. I shall examine not the emotional aspects, but the hard figures. It is likely that a family of four will use the fish and chip shop twice a week. Single-parent families may use it more. The family who use the fish and chip shop twice a week will spend about £6 a week on fish and chips—£300 in a full year. They will be about £50 a year worse off because of the tax. That might not sound much to the Chancellor, but it is a lot to such a family. The Chancellor makes specious claims about the margins where families are better off. A tax of £50 a year is too heavy for poor families.
The tax will have an acute effect on businesses. The larger chains will have to reduce labour to cut costs or raise their prices and thereby reduce turnover. The result for the larger chain will be an increase in unemployment and a marginal increase in inflation. Is that what the Government want? Is that what the Chief Secretary had in mind when he discussed the introduction of the tax? The small shops will not be able to absorb the costs, even by cutting labour, and may go out of business. That will result in an increase in unemployment, a loss of tax revenue and further bankruptcies. The imposition of VAT will lead to increased unemployment, inflation and social deprivation all round.
In attempting to fulfil his obligations as a taxpayer by collecting VAT for the Chancellor, the small business man will have to devise a system with probably two tills. Anyone who knows about retail businesses will know that even the most ordinary tills are extremely expensive capital equipment, but there will be no capital allowances for the small business man. He will have to have two tills or devise some other way of ensuring that he keeps his records to the satisfaction of the Customs and Excise. With his small overheads, he will not be able to change them or his labour costs, and he will not be able to afford the fancy accountants who may be able to help the larger chains to minimise their problems.
The Government have no answer to those points. I await with great interest the Chief Secretary's attempt to answer them. I hope that he will answer the specific questions that I have put to him.

Mr. Austin Mitchell: As a dedicated northerner who was brought up on fish and chips and who now represents England's premier fishing port which is surrounded by fields of potatoes, and a man who finds eating fish and chips life's second greatest pleasure, I should perhaps declare an interest — a passionate interest — in the subject. This proposal is of major concern to my constituency and to the fishing trade, which is centred on it. It is also politically infuriating to see this rather sordid and silly measure being rushed through. It is a last monument to a reforming Chancellor, of whom great


hopes of radical reform were held out. The mountains have now laboured and produced a 15 per cent. tax on fish and chips. That is real reform from the Chancellor.
We are seeing a rerun of the syndrome that the Chief Secretary—the Treasury's own Kentucky fried chicken — voiced in 1981 — the "We need the money" syndrome: "We need the money to hand out to the better off and the people with capital, so we are putting a 15 per cent. tax on a bag of chips." The "We need the money" syndrome can have no worse expression than that. I do not want to make a meal of the issue, but it is paradoxical. There are 20,000 small businesses involved in the takeaway food industry. Most of them are family businesses. They employ members of a family who work long, inconvenient and difficult hours in a labour-intensive job. They provide an important service, and these small businesses are being hit. It is a reflection on today's Tory party. If this measure had been imposing taxation on the oil industry or the banks, we would have seen the Conservative Benches thronging with Members, all passionate and eager to make speeches to articulate the vested interests that they represent. Because it is a measure that hits 20,000 small businesses and their poorer constituents, the Conservative Benches are almost empty. There are Conservative Members present with little to say on this important matter.
This tax will be a serious blow to small businesses. Many of them are struggling. One should not be deceived by the glamour of the fast-food chains. Fish and chip shops have been hard hit by the recent changes — the escalation in the price of fish and potatoes, the destruction of neighbourhoods, the pattern of social change and the increasingly intense competition from other take-away foods. Many fish and chip shops have closed over the past few years. The trade has suffered a series of setbacks. This tax will be another setback in a long chain of difficulties. It is an extremely competitive environment which will be hard hit by the Government's measure. These small business men are not great lobbyists. They do not have the professional lobbying of the oil industry or the banks when they are hit, but they are raising a cry of pain because they know that there will be a serious effect on the industry. The measure hits small businesses and the people's food.
One of the worst things about the measure is that the Government, who have done so much to increase poverty—there are 4 million people out of work and more than 7 million people on supplementary benefit—should now have the gall, audacity and sheer lack of taste to impose a 15 per cent. tax on the people's food.
It is clear from all the research that take-away food, fish and chips in particular, is the food of low-income families, those who do not have cooking facilities, families who eat at irregular times so that it is impossible for the mother, who is probably working, to prepare food for the family—the traditional image of the English family sitting down to roast beef is wrong. These are families who eat at haphazard times because the kids, father and mother come in at different times. Take-away food, particularly fish and chips, is ideal for such a family. That type of poorer family will be hit by this measure. People living alone who do not want and cannot make the effort to cook for themselves go out and buy take-away food. The old will be hit, as will those who have long had a habit of eating fish and chips and take-away food, who perhaps do

not have the facilities or money to cook for themselves. Students away from home in accommodation without cooking facilities, people who work late and people who do shift work make up the section of the community that will be hit badly by this tax.
The HOTAG campaign estimates that the average price of a take-away meal is £1·50. In Grimsby that is an exaggeration. The average price of fish and chips in Grimsby would probably be 85p. This weekend my telephone has been red hot. I have had a score of telephone calls from fish and chip shop proprietors telling me about their trade and the problems that this measure will pose for them. The average price of a bag of fish and chips is about 85p. It can be slightly less or slightly more depending upon the area and what the market will bear. The change will put the price up to about £1. It will produce the problem of whether the VAT is put on the chips or whether there is an extra charge on the fish.
The imposition will hit Grimsby. There will be a price increase for a section of the community which has had to bear the sacrifices imposed by the Government's economic policies.
I shall not discuss the anomalies that have been caused by the Government relying upon inaccurate EEC statistics, but when VAT was first proposed in 1972 Sir John Non said that his right hon. Friend had zero-rated certain items because they made up a large proportion of the low-income family's budget. It was a measure over which the Conservative Government agonised. They decided that the best way to help low-income families was to zero-rate take-away food. They drew the line there.
If one looks back through Hansard, one finds that there was a certain amount of argument about it, but it was a sensible decision. With poverty increasing, it is wrong to shift that line. It shows that the Government have no idea how most people live and eat and how difficult the daily struggle for existence is for the mass of the people. Ministers seem to believe that people eat in fish and chip shops. The Minister for Health said that on television. It is inaccurate. Most fish and chips are eaten outside the fish and chip shop.
In her famous visit to Harry Ramsden's, the Prime Minister saw a rare fish and chip shop, in which people were eating inside. It gave me some grief, because the pictures of the Prime Minister visiting Harry Ramsden's have now replaced pictures of me eating there in 1974. That is a sad come-down. The Prime Minister there gained the impression that people eat fish and chips in a restaurant. They do not. They take them out and eat them on their way or at home. That is the importance of the trade.
The Government have been fooled by the rapid rise in the number of chains, such as McDonalds, into thinking that here is a profitable source of taxation. There has been a rapid expansion in that type of trade, but over half the 20,000 small businesses involved in it are still the traditional fish and chip shops.
It is interesting to note that the fish and chip trade began in the 19th century. From the publicity that we have been sent we see that the first known reference to it was in "Oliver Twist" in 1838 and that the concept of chipped potatoes came from France in the 1860s. The rapid distribution of fish through the railway system and the rapid growth of the manufacturing towns made fish and chips the basic diet for people in the industrial centres. Indeed, it is still the basis of the take-away food industry.
The National Federation of Fish Friers estimates that there are 10,500 traditional fish and chip establishments, having a total turnover of £400 million a year.
I emphasise that point because of its importance to Grimsby, for those shops consume 190,000 tonnes of white fish, or one third of the white fish available for human consumption in Britain. Sadly, the British fleet is not catching that total; we are having to rely on imports. About 74 per cent. of the fish sold in fish and chip shops is cod; haddock—the more popular fish in the north, particularly in Yorkshire and especially in Grimsby—12 per cent.; plaice, 4 per cent.; and skate, 2 per cent. In other words, the sales of fish in fish and chip shops are a basic element in the demand for the landings of the British fishing fleet, and particularly the Grimsby fleet.
Last week, and over the weekend, I talked with fish merchants, over one third of whose trade is done with fish and chip shops. That provides a basic level of guaranteed demand which is crucial to the fleet and to British landings, particularly as the big processors — for example, Birds Eye and Findus—have taken steps, due to the uncertainties produced by the common fisheries policy and by the Government's failure to back the fishing industry, to secure imports of fish to guarantee their supplies. Therefore, the basic level of demand on the market in Grimsby is sustained by the fish and chip and restaurant trade.
That is why we have a distribution network which carries the fish from Grimsby all over the country. If there is a fall in consumption, as there almost certainly will be as a result of the increase in price resulting from the imposition of VAT, that basic demand for the landings of the Grimsby fleet, essential to keep the fleet going, will suffer. That in itself is a major reason why a Government, who have failed to help the fishing industry when it needs help to survive, should not impose VAT on fish and chips.
This step is being taken by a Government who have no sensitivity to the conditions of the people, whose members do not eat fish and chips, even if they look as though they do, and who have no idea how the ordinary people live. This duty is being imposed on a struggling industry—the fishing industry is struggling to survive.
As the Chief Secretary is almost certainly a regular fish and chip shop visitor, I am sure that he will have ready and quick answers to some questions that I have for him. They are the sort of questions that fish and chip shop proprietors and other take-away food operators have been asking.
A Grimsby fish and chip shop proprietor telephoned me on Saturday to ask what the situation would be if he made his fish and chips free and charged 90p for the salt and vinegar. Another operator of a take-away food establishment asked what the situation would be if he continued to charge the same price, without VAT, but provided in an alcove just outside his shop a microwave oven in which people could heat up the take-away food.
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Various questions arise from the long and involved notice issued by the Customs and Excise, about how the proportion of sales liable to VAT will be made and what appeal against Revenue assessments the fish and chip shop proprietor will have. The notice reads:
If, after the change, you still cannot keep a record of each sale, you must produce a fresh estimate of the proportion of your gross takings which relates to your standard rate of supplies. You must advise your local VAT Office in writing of your estimate,

which should be arrived at by recording your transactions for a selected period. The period selected should be representative of the trading of the business.
What right of appeal will people have if they contest decisions that are arrived at? How will the system be policed with only 12 additional inspectors to be appointed by the Government? These are important questions for small business men, many of whom resent being turned into what they regard as Government tax collectors. They will face problems with the paper work because many of them confess to not understanding how it is to be done, what their responsibility will be and what their rights and powers are in relation to the Customs.
I emphasise that this tax could be imposed only by a Government who have lost touch with the realities of daily life in Britain and whose Back Benchers are supine in the face of a threat to genuine small business in the sense of hard-working, not tax-fiddling, small business, and a threat to the standard of living of their poorer constituents.

The Chief Secretary to the Treasury (Mr. Peter Rees): This is the first debate of the Committee stage of the Finance Bill. The hon. Member for Great Grimsby (Mr. Mitchell), whose constituency and personal interests entitle him to be heard with great respect, said at the opening of his remarks that this measure was being rushed through. I do not think that anyone who has listened to the debate—and I have had the privilege of listening to every word of it—could possibly say that hon. Members had failed to do leisurely and thorough justice to what I am ready to concede is an important, if narrow, issue.

Mrs. Elaine Kellett-Bowman: Will my right hon. and learned Friend point out to the hon. Member for Great Grimsby (Mr. Mitchell), who has left the Chamber, that while he was speaking there were far more Back Benchers on this side of the Committee than there were on the Labour Back Benches?

Mr. Rees: My hon. Friend is right to draw attention to that fact. I was tempted to say—because there was a certain disposition on the part of Opposition Members to suggest that the Government Back Benches were supine—that anyone who had listened to the highly informed, elegant contributions from the Conservative Benches, which more than matched the elegance, in quality if not in quantity, of some of the contributions of Opposition Members, would recognise that this had been a well-matched debate on a subject that was bound to attract the interest and attention of our fellow countrymen, and rightly so. This issue is being disposed of in a thorough manner, as one would expect.
The issues involved should be set in their true context. I have been pressed to answer many questions. I shall endeavour to answer all of them, remembering that this has been a long debate, but I must first set the issues in their factual context. There was a gross slur on the Chancellor of the Exchequer when it was suggested that he was ignorant of the gastronomic charms of fish and chips. I am assured—the point was well made by my hon. Friend the Member For Broxtowe (Mr. Lester)—that the Chancellor is well acquainted with the charms of fish and chips. Indeed, it might be said to be the gastronomic fuel with which his masterly Budget speech was constructed. Let us put that canard to rest. It has been well demonstrated that several of my Conservative colleagues are able to match chip with chip with Labour Members.
For reasons which I think the Committee will have divined, Opposition Members have concentrated almost exclusively on fish and chips, which is perhaps to give the wrong emphasis to our debate. The turnover of the take-away food industry—we are talking of take-away foods in general—is about £1·5 billion. No one can be utterly confident of that figure, and the hon. Member for Stoke-on-Trent, Central (Mr. Fisher) was disposed to say that it is £1·1 billion. I think that the more accurate figure is likely to be £1·5 billion, but I am not being dogmatic about that. However, that figure suggests that we are talking about a fairly buoyant industry. Anyone who has charted its course since the end of the 1970s will recognise that. I feel confident that it will take in its stride the modest charge to VAT which is to be imposed upon it.
I shall give the Committee the breakdown, as far as we are able to discern it, of the fish and chip sector of the take-away food industry and the whole industry. Of the annual yield of £200 million which my right hon. Friend the Chancellor of the Exchequer expects to receive from the imposition of VAT on take-away outlets, only about £70 million is likely to be contributed by the fish and chip sector—about one third of the total. However, Labour Members—I suspect because it makes a more dramatic case—have concentrated on the fish and chip sector, apart from a rather highly charged argument about an attack on ethnic food shops. As I have said, I suspect that it rather suits their case to do so. I recognise that the hon. Member for Great Grimsby has a direct constituency interest, which is an honourable and special one, but I remind the Committee that fish are caught in areas of the United Kingdom other than Grimsby and that fish and chips are cooked in other parts of the United Kingdom.
The hon. Member for Birmingham, Perry Barr (Mr. Rooker), who introduced the debate, concentrated on outlets. I understand that his figures were taken from the Euromonitor. The figures, which were not necessarily based on turnover, may have led him to give undue prominence to fish and chip shops rather than to Chinese take-aways, Indian take-away food, hamburger establishments, kebab houses, cooked chicken establishments, Kentucky fried or otherwise, and pizza houses. We should not disregard any of these important groups within the take-away food sector.
I hope that the hon. Member for Perry Barr will recognise that he was talking about outlets and not about turnover. I have given the overall figure for turnover and it is important to bear that in mind and also the proportion of the VAT revenue that is likely to be contributed by fish and chip establishments.

Mr. Fisher: The Chief Secretary says that he has given the Committee the turnover figure, but he has not. He referred specifically to £1·145 billion, which was my figure, and said he thought it was rather more than that. Is he saying that he does not know the turnover on which he is levying the tax?

Mr. Rees: I cower under the verbal lash of the hon. Gentleman. It would be wrong of me to claim the spurious precision which the hon. Gentleman has claimed for his figure. I have given the best estimate that my right hon. Friend the Chancellor of the Exchequer, I, my right hon. and hon. Friends and Customs and Excise can offer the

Committee. If the hon. Gentleman has a better source of information, I have no doubt that he will give it to the Committee on some other occasion.
It may interest the Committee to know that average consumption of fish and chips per week is to be found in the north-west. So much for the impassioned assertion of the hon. Member for Rochdale (Mr. Smith) that the Government propose an attack on the area which he represents. I am sure that we all respect his doughty defence of his constituency interests, but we must get the debate into its true perspective. Consumption in the north-west is about average, as it is in the east midlands and west midlands. I concede at once to the hon. Member for Great Grimsby that the north and Yorkshire and Humberside are areas of above-average consumption. It will interest the hon. Member for Glasgow, Cathcart (Mr. Maxton) to know that, along with the south-east, the south-west, Wales and Northern Ireland, consumption in Scotland is below average. I accept that the Scots have other gastronomic tastes. We may not be able to share those tastes, but we respect them.

Mr. Maxton: I am sure that the Chief Secretary will recognise that the fish and chip shop in Scotland sells a much wider range of goods than similar shops in other areas, including products such as black pudding, which is almost unique to Scotland—[HON. MEMBERS: "No."]

Mr. Rees: This is turning into an interesting regional debate. Sociologists will turn to the report of our debate as a rich quarry of lore on the early 1980s. To characterise our proposals—I hope that the Committee will accept this—as an attack on any particular region does not bear close scrutiny when the facts are considered.

Mr. Cyril Smith: I have a letter signed by the secretary of HOTAG, which reads:
Cyril Smith, MP, has an Early Day Motion arguing that the north will be hardest hit by the tax and also the poorer sections of society. Our poll shows this to be absolutely accurate.

Mr. Rees: I respect that powerful action group, which has recently sprung into action. I have given the figures which we have derived from the family expenditure survey and the Committee will judge for itself whether it prefers the slightly highly charged statements of the hon. Member for Rochdale or the rather more dispassionate figures extracted from the survey.
It is asserted that the Government's proposals constitute an attack on the working class. I hope that we shall be able to have a balanced debate as we scrutinise the Bill. Having been privileged to attend various previous debates on Finance Bills, and recognising various familiar faces across the Floor of the Chamber, whom I expect to see in Committee Room 10, I believe it fair to say that we have before us a balanced Finance Bill. To see such a Bill in class warfare terms will rather stultify the careful and dispassionate analysis which the Bill deserves.
I shall give another figure from the most recent family expenditure survey to set the debate in its true context.

Mr. Campbell-Savours: rose—

Mr. Rees: I shall place the facts before the Committee and then allow the hon. Gentleman to intervene. It is necessary to try to set the debate in a factual context. The Government's figures come from the most recent family expenditure survey of 1982 and they have been uprated to 1984–85 prices. It appears that the average expenditure on hot take-away food of a single person on average earnings


was 87p per week. The additional price that he will have to pay, including VAT, will be 13p. The average expenditure of the average married couple was, surprisingly, rather less. It was 80p, and the VAT to be paid per week will be 12p. The expenditure of a married couple with two children was £1·53 and for that family the VAT will amount to 23p. I yield to none in my admiration for high-flown oratory on these issues, but to suggest, on the basis of the figures that I have given, that the Government propose a fundamental attack on the standards of the working class does not bear very close examination, especially when it is borne in mind that every taxpayer in the United Kingdom is likely to be £2 a week better off as a result of the dramatic increase in thresholds which my right hon. Friend the Chancellor of the Exchequer was able to introduce in his Budget statement.

Mr. Campbell-Savours: When the Minister reads Hansard tomorrow I hope he will acknowledge that my hon. Friends referred to low income groups and not to class. He may understand the point that I am making.

Mr. Rees: I know that the hon. Gentleman commands a fastidious use of language. When he reads the report of the debate in Hansard tomorrow I think he will find that the command of language of some of his hon. Friends is rather less fastidious.
The Government's proposals have also been seen as an attack on the small business sector. I am touched by the conversion of Labour Members to the support of the small business sector. I am so glad that we have at last found common ground on such an issue. I am sure that it will advance our debate in Standing Committee to know that there is a consensus in the House that the small business sector deserves consideration in fiscal matters. I look forward confidently to ringing support from the Opposition for the abolition of the national insurance surcharge and the remarkable reductions that we propose in the corporation tax rate on small businesses. I hope that those measures will go some way towards assuaging the Opposition's anxieties and make them realise that this is a carefully crafted, well-balanced Budget. That factual background sets our humble efforts in their true context.
7 pm
The hon. Member for Perry Barr was right to press us about the factors that led us to choose to levy VAT on this part of national expenditure. As my right hon. Friend the Chancellor emphasised, we wish to see a modest shift from taxation on income—direct taxes—to taxes on spending. This measure will yield about £200 million in a full year and will make a serious contribution to the tax forgone because of the changes to the tax threshold. I suggest to the Committee that one cannot pick elements from the Budget with which one disagrees if one supports the broad thrust of the Chancellor's strategy. I would understand the position if Opposition Members were prepared to argue that we should not have increased the income tax threshold, but I do not believe that they say that. I have heard Opposition Members say that counterbalancing savings would be made if the amendments were accepted. Perhaps we shall learn more about that as the Bill proceeds.
The hon. Member for Perry Barr, with his siren voice, suggested that it would be a small matter to defer the introduction of VAT until a more convenient time. Every month of VAT forgone on this element of expenditure will

mean £16 million of revenue forgone. By my standards, that is a considerable sum. If our proposed modest extension of VAT was as vicious as has been suggested during the debate, there would be no question of prolonging the agony to defer the introduction until the autumn. Despite the persuasive arguments of the hon. Member for Perry Barr, I point out that a deferment of the tax would not be in the interests of the country as a whole and would cause considerable difficulties for the Chancellor's figures.
The hon. Member for Perry Barr, as he was entitled to do, and some of his hon. Friends drew attention to an incorrect answer given on the rates of VAT and similar expenditure in other countries of the European Community. My hon. Friend the Minister of State, Treasury made the position absolutely clear in his latest answer to the hon. Member for Perry Barr. My hon. Friend authorises me to repeat his apologies to the House for the fact that the error crept in. Even when one looks at the true facts, one finds that in Denmark, take-away meals are subject to 22 per cent. VAT, and no distinction is made between take-away and restaurant meals. In France the distinction is made only if a shop contains no part in which a customer can eat meals on the premises. If there is even one table and one chair, the VAT charge is 18·6 per cent., as it is on restaurant and cafe meals. In Italy the charge of 10 per cent. on take-away meals is the same as that on restaurant meals. In the Netherlands the charge varies, I am bound to concede, between 19 and 5 per cent., depending on the circumstances. Chips and sausage rolls are taxed at 19 per cent. and whole meals are taxed at 5 per cent. There is a wide variety of taxation.
The hon. Member for Stoke-on-Trent, Central, who seems to anguish over—

Mr. Gerald Bermingham: Will the right hon. and learned Gentleman give way?

Mr. Rees: I am referring to the hon. Member for Stoke-on-Trent, Central. I did not notice the hon. Member for St. Helens, South (Mr. Bermingham) contributing to the debate, so I hope he will allow me to deal with the points made by hon. Members who have taken part.
The hon. Member for Stoke-on-Trent, Central suggested that we had made the decision after an erroneous appreciation of the facts. I reassure the Committee that that is not so. We would have reached the same conclusion on the basis of the actual figures. Even if one prays in aid the practice in the rest of the European Community, I remind the Committee that we still have one of the narrowest VAT bases in the whole of the Community. I suggest that widening the VAT base is probably in the best interests of — I should not like to say fiscal purity — a well-constructed scheme of indirect tax.
A long-established element in British political life, going back to the 19th century, suggests that we should be chary of introducing a tax on food. None the less, the introduction of VAT has meant a tax on meals in restaurants and cafes. In April 1974 the right hon. Member for Leeds, East (Mr. Healey) decided that it was right to introduce VAT on certain discretionary foods, and I admired his courage. He itemised potato crisps, chocolate biscuits and ice cream. I do not know whether they should be described as working-class foods. I do not see gastronomy in those terms.
On 30 April 1974 the then Chief Secretary to the Treasury, now Lord Barnett, said:


There is nothing novel about a proposal to impose indirect taxation on inessential foods.
I know that some Opposition Members would say that that statement begs the question, "What are inessential foods?" The Chia' Secretary continued:
The House will recall that purchase tax was first imposed on ice cream, soft drinks, sweets and similar products in 1962. It probably took a lot of courage on the part of the then Chancellor to take the risk of going down in history as the Chancellor who first taxed children's spending money, but I am sure there is now a broad measure of agreement that the judgment was right, to broaden the scope of the purchase tax by including some articles which most people would consider no less suitable for taxation than those which were already included."—[Official Report, 30 April 1974; Vol. 872, c. 1044.]
That eloquent speech referred to the practice after the introduction of VAT on crisps, ice cream and chocolate biscuits. My right hon. Friend the Chancellor is only following where the right hon. Member for Leeds, East led.

Mr. Michael Shersby: Is my right hon. and learned Friend arguing that those foods are less essential than other foods? Is he aware that for many families, especially in Northern Ireland, confectionery is an important part of the diet?

Mr. Rees: I was not seeking to draw any refined or controversial distinctions. I was merely drawing comfort from the words of Lord Barnett as he now is. My hon. Friend assures me that those are essential foods, and that makes the case even more strongly. It means that the then Chancellor was disposed to introduce VAT on what my hon. Friend assures the Committee should be regarded as essential foods in certain regions. My right hon. Friend the Chancellor is, therefore, entitled to extend the base of VAT in this instance. I hope that the Committee, on reflection after a thorough debate, will take note of that point.
One or two technical and important matters were raised, especially by my right hon. Friend the Member for Blackpool, South (Sir P. Blaker), who was supported by my hon. Friend the Member for Wyre (Sir W. Clegg). [Interruption.] I do not wish to be presumptuous or anticipate the results of the Division, but I may be able to reassure Opposition Members.
The first question was based on the examination by Thornton Baker and Co. It was suggested that there might be a drop in trade of between 14 and 20 per cent., based on the consequences that have obtained since 13 March. I say, with respect to that distinguished firm of accountants, that that is a matter of conjecture. If the volume of expenditure on those projects is maintained at precisely the same level, there will be a drop of 13 per cent. This cannot be a matter of scientific precision. Obviously many factors must be taken into account, and we shall have to wait and see.
The hon. Member for Stoke-on-Trent, Central and others asked about the extent of job losses. I must send a thrill of horror through the hon. Gentleman and my right hon. and hon. Friends and say that I cannot give a precise figure, as many factors bear on this question. Take-away food cannot be considered in isolation. One must consider also the impact of the increase in thresholds, which will put more spending money into the pockets of many of our fellow countrymen. I must be perfectly clear and candid on this. I cannot give a precise figure, but I suspect that

at the end of the day there will not be a loss of jobs. Similarly, the loss of income tax and corporation tax depends on conjecture about the loss of revenue to this sector of the national economy.
My hon. Friends the Members for Broxtowe and for Darlington (Mr. Fallon) raised an important point about apportionment, with particular regard to bakers. I am sure that such a sophisticated sector of the economy as that of take-away food will be well able to take in its stride any problems that this may cause. In this context I remind the Committee that various accountancy schemes are in force, and any trader, registered or otherwise, can no doubt obtain information about them from the local VAT office. I am sure that traders will find the practical questions a good deal less forbidding than some hon. Members have suggested.
Various points were made on the borderline, including those in a powerful intervention from the hon. Member for Rochdale. Points about the precise meaning of ambient temperature will doubtless exercise our minds when we come to amendment No. 11, so perhaps I may leave my comments on those aspects for that debate.
In conclusion, the Budget must be considered in the round. It would be quite the wrong approach to this particular Budget to pick out elements with which the Committee does not entirely agree, unless hon. Members whose amendments seek to strike out certain provisions can suggest alternative means of raising the revenue. Alternatively, we are happy to receive suggestions from them as to how a further £200 million of public expenditure could be saved. That is the only fair way to approach this Budget. Failing that, I believe that it is right and proper to accept the thrust of the proposed charges.
I hope that after this thorough and leisurely examination of the issues involved the Committee will reject the amendment, although I quite understand the motives which led the Opposition to table it. I hope that the whole Committee, having considered the facts, will realise that there is a very solid case for extending VAT at 15 per cent. to take-away foods.

Mr. Rooker: If I understood him correctly, the Chief Secretary sought to imply that there is no case for deleting parts of a Finance Bill to which hon. Members object because it must be considered in the round and we must accept the package as a whole. At that rate, we might as well not have a House of Commons or a scrutiny procedure for Finance Bills. In fact, there is no problem in deleting some provisions in the way that our amendments suggest. Additional revenue can be raised by means such as investment income surcharge and capital transfer tax. As the Chief Secretary well knows, it is not always possible for Opposition Members or Government Back Benchers to deal in amendments with the raising of additional revenue. We may as well get this argument out of the way now so that we do not have to go through it on every amendment. There is no difficulty about making the Bill fairer in the way that our amendment suggests.
7.15 pm
The Chief Secretary quoted my right hon. and noble Friend Lord Barnett. This quotation business has reached the point where I feel that I should always come prepared with a quotation of my own. On this occasion I shall give just one. I shall then be prepared to call a truce. Referring to fish and chip shops, my right hon. and noble Friend said:
In my constituency, although I may have missed a few, we certainly have more than 60, and in other constituencies in the North West there may be even more. This is not a small matter because it affects large numbers of people . . . These are not the sort of people who will eat caviar and lobster and oysters. We are discussing a different sort of person."—[Official Report, 10 May 1972; Vol 836, c. 1422.]
In that speech, my right hon. and noble Friend was, of course, opposing aspects of the original introduction of VAT. For every quotation that the Chief Secretary finds, we shall dig up another. My right hon. and noble Friend has said many good things, although I might not necessarily have agreed with all of them at the time. Nevertheless, perhaps we may now call a truce.
In short, as I understood the Chief Secretary's response to the debate, he could give no answers. He said that he did not know how many jobs would be lost. My question about the number of shops that would close was based on answers from the Treasury and the Chancellor. Treasury Ministers have admitted that there will be a reduction in the number of traders registered for VAT. How many?

Mr. Peter Rees: We do not know.

Mr. Rooker: It is no use the Chief Secretary saying that he does not know. We are entitled to the answer. What is the Treasury estimate of the number of traders who will go out of business? In answer to questions, Treasury Ministers have said that they think that there will be a small net reduction. The public may think that the Prime Minister is running a dictatorship, but it stops at the doors of this House. We want answers to these questions. How many small traders will go out of business and not be registered for VAT? Does the Chief Secretary know? Treasury answers to questions state that there will be a loss. Will it be 50, 100, 200, 1,000, or how many?

Mr. Rees: We cannot say.

Mr. Rooker: If that is so, how does the right hon. and learned Gentleman know that there will be a loss? He has argued that there will be such a swelling of money in people's pockets due to threshold increases that no jobs will be lost. That argument could be extended to say that no shops will close. There might even be an increase in take-aways.

Mr. Rees: There might well be.

Mr. Rooker: The Chief Secretary now says that there might even be an increase. In short, the Government have no idea of the effect on the industry of the tax that they intend to impose.
Conservative Members have spoken against the Government but have said that they will wait until Report to see how the tax actually affects traders and constituents, with a hint—certainly from the right hon. Member for Blackpool, South (Mr. Blaker)—that something might be done then. As one hon. Member said, however, it is far more difficult to remove a tax than to stop it being imposed in the first place. I urge Conservative Members not to wait until Report. The Division about to take place will be the time to stop this tax. They should not string people along until Report in the belief that things can be changed then, with all the problems of tax already paid in the intervening weeks, which will certainly not go back to the customers.
I wish to apologise briefly to the hon. Member for High Peak (Mr. Hawkins), whom I did not intend to include in my castigation of the bone idleness of all Tory Members elected in 1983. His amendments related to the building

aspect of VAT, not to food. I certainly exclude him from that criticism and I trust that he did not take it personally, given the nature of his intervention.
The hon. Member for Chorley (Mr. Dover) made a courageous speech, saying that he intends to vote with the Opposition. No doubt the Whips will take him on one side, and that will be the end of his political career. That is what happens to Conservative Members who have the temerity to vote against the Government.
The Chief Secretary seemed to chastise my hon. Friends for referring to the effect on small business men and the self-employed. There is nothing wrong with raising that question. Where are the spokesmen for the Small Business Bureau today? Why are they not here? The Small Business Bureau has its headquarters in Central Office, Smith Square; it is a Tory party organisation. The BBC should wake up to the fact when it interviews spokesmen from the bureau in discussions on small business matters.
Small business men are being attacked by the measure. The Tory party pays lip service to helping small business men, but, if anything, the Finance Bill will help medium businesses. It is not intended to help small business men. There is an attack on small business men, and they know that that is so. They write to me and to my hon. Friends about it, and they tell us so in private, but unfortunately they are not so vociferous in public.
If has been suggested that there was a leak about the life assurance change, and that it was therefore possible to measure the effect of the change that would occur. People make arrangements because of what they think will be in the Budget. We saw what happened in the case of life assurance.
I do not believe that there was a leak. Even if there had been, it would have made no difference to the take-away food industry. I do not believe that the millions of customers would have believed that the Government would be stupid enough to introduce such a tax. That being so, the leak would not have mattered a jot.
The Chief Secretary has referred to amendment No. 11, and there will be some words to be said about that amendment. I have now to draw to the attention of the House some points in the Customs and Excise notice about VAT on take-away food. The possibility of tax evasion, or fiddles, has been discussed. The food might be heated not at the point of sale but afterwards, or a charge might be made for the vinegar. It is worth quoting a couple of sentences from the VAT notice which make it clear that it is not hot items of food which will suffer the imposition of VAT. Page 2 of the notice states:
Where a supply of hot food includes an essential ingredient which is cold, such as the bread roll enclosing a hot dog or hamburger, you should treat the whole supply as liable to the standard rate.
Cold essential elements of hot food will pay VAT at 15 per cent. Because of that, and because of the set-up in many food shops—particularly fast food shops which cater for sit-down business too—the problems created by different tills and different rates for VAT will be considerable. The notice continues:
The incidental provision of cold items which are not separately charged for, such as a dollop of mustard, tomato sauce or chutney, should be ignored.
The get-out there is "not separately charged for". If the items are separately charged for at a phenomenal rate and the rest of the food is given with them, there is nothing in the VAT notice or the Bill which will enable the VAT


inspectors to collect the tax on that hot meal. The Bill is full of loopholes, and so is the advice of the Customs and Excise to small traders.
The Chief Secretary has not answered the key questions about loss of business. He has admitted from a sedentary position — I hope that Hansard noted it — that the Government do not know whether there will be a loss or a gain in jobs, or whether the take-away shops will close down or expand. That is not way for a responsible Government to operate. I therefore ask my hon. Friends to join me in the Lobby.

Question put, That the amendment be made:—

The House divided: Ayes 139, Noes 241.

Division No. 256]
[7.24 pm


AYES


Anderson, Donald
Haynes, Frank


Ashley, Rt Hon Jack
Healey, Rt Hon Denis


Ashton, Joe
Hogg, N. (C'nauld &amp; Kilsyth)


Atkinson, N. (Tottenham)
Holland, Stuart (Vauxhall)


Bagier, Gordon A. T.
Howells, Geraint


Barron, Kevin
Hoyle, Douglas


Beckett, Mrs Margaret
Hughes, Dr. Mark (Durham)


Beggs, Roy
Hughes, Robert (Aberdeen N)


Beith, A. J.
Hughes, Roy (Newport East)


Bell, Stuart
Hughes, Sean (Knowsley S)


Bermingham, Gerald
Janner, Hon Greville


Bidwell, Sydney
Jones, Barry (Alyn &amp; Deeside)


Blair, Anthony
Kennedy, Charles


Boyes, Roland
Kilroy-Silk, Robert


Bray, Dr Jeremy
Kinnock, Rt Hon Neil


Brown, R. (N'c'tle-u-Tyne N)
Kirkwood, Archibald


Brown, Ron (E'burgh, Leith)
Lamond, James


Buchan, Norman
Leadbitter, Ted


Caborn, Richard
Leighton, Ronald


Callaghan, Jim (Heyw'd &amp; M)
Lewis, Ron (Carlisle)


Campbell-Savours, Dale
Lofthouse, Geoffrey


Carter-Jones, Lewis
McCartney, Hugh


Clark, Dr David (S Shields)
McDonald, Dr Oonagh


Clay, Robert
McGuire, Michael


Cocks, Rt Hon M. (Bristol S.)
McKelvey, William


Coleman, Donald
McNamara, Kevin


Conlan, Bernard
McWilliam, John


Cook, Frank (Stockton North)
Madden, Max


Corbyn, Jeremy
Marshall, David (Shettleston)


Cowans, Harry
Mason, Rt Hon Roy


Crowther, Stan
Maxton, John


Cunliffe, Lawrence
Meacher, Michael


Davies, Rt Hon Denzil (L'Ili)
Michie, William


Dixon, Donald
Mikardo, Ian


Dormand, Jack
Milian, Rt Hon Bruce


Dover, Den
Miller, Dr M. S. (E Kilbride)


Dubs, Alfred
Mitchell, Austin (G't Grimsby)


Duffy, A. E. P.
Molyneaux, Rt Hon James


Dunwoody, Hon Mrs G.
Morris, Rt Hon A. (W'shawe)


Eadie, Alex
Oakes, Rt Hon Gordon


Eastham, Ken
O'Brien, William


Fatchett, Derek
Park, George


Faulds, Andrew
Patchett, Terry


Field, Frank (Birkenhead)
Pendry, Tom


Fisher, Mark
Penhaligon, David


Flannery, Martin
Pike, Peter


Foot, Rt Hon Michael
Powell, Rt Hon J. E. (S Down)


Foster, Derek
Prescott, John


Fraser, J. (Norwood)
Randall, Stuart


Freeson, Rt Hon Reginald
Redmond, M.


Freud, Clement
Rees, Rt Hon M. (Leeds S)


George, Bruce
Richardson, Ms Jo


Golding, John
Roberts, Ernest (Hackney N)


Gould, Bryan
Rooker, J. W.


Gourlay, Harry
Ross, Ernest (Dundee W)


Hamilton, W. W. (Central Fife)
Ross, Stephen (Isle of Wight)


Harman, Ms Harriet
Sedgemore, Brian


Hart, Rt Hon Dame Judith
Sheldon, Rt Hon R.


Hattersley, Rt Hon Roy
Silkin, Rt Hon J.



Skinner, Dennis
Wareing, Robert


Smith, C.(1sl'ton S &amp; F'bury)
Weetch, Ken


Smith, Cyril (Rochdale)
Welsh, Michael


Soley, Clive
Wigley, Dafydd


Spearing, Nigel
Williams, Rt Hon A.


Stewart, Rt Hon D. (W Isles)
Wilson, Gordon


Stott, Roger
Woodall, Alec


Thomas, Dr R. (Carmarthen)
Young, David (Bolton SE)


Thorne, Stan (Preston)



Tinn, James
Tellers for the Ayes:


Wainwright, R.
Mr. James Hamilton and


Wallace, James
Mr. Allen McKay.


Wardell, Gareth (Gower)



NOES


Adley, Robert
Favell, Anthony


Aitken, Jonathan
Fenner, Mrs Peggy


Alexander, Richard
Finsberg, Sir Geoffrey


Alison, Rt Hon Michael
Fletcher, Alexander


Amery, Rt Hon Julian
Forman, Nigel


Amess, David
Forth, Eric


Arnold, Tom
Fowler, Rt Hon Norman


Ashby, David
Fox, Marcus


Aspinwall, Jack
Freeman, Roger


Atkins, Rt Hon Sir H.
Fry, Peter


Baldry, Anthony
Gale, Roger


Batiste, Spencer
Galley, Roy


Bellingham, Henry
Gardiner, George (Reigate)


Bendall, Vivian
Gardner, Sir Edward (Fylde)


Berry, Sir Anthony
Garel-Jones, Tristan


Biggs-Davison, Sir John
Glyn, Dr Alan


Blaker, Rt Hon Sir Peter
Goodhart, Sir Philip


Bonsor, Sir Nicholas
Goodlad, Alastair


Boscawen, Hon Robert
Gorst, John


Bowden, A. (Brighton K'to'n)
Gow, Ian


Bowden, Gerald (Dulwich)
Gregory, Conal


Boyson, Dr Rhodes
Griffiths, E. (B'y St Edm'ds)


Braine, Sir Bernard
Griffiths, Peter (Portsm'th N)


Bright, Graham
Grist, Ian


Brinton, Tim
Ground, Patrick


Brooke, Hon Peter
Grylls, Michael


Brown, M. (Brigg &amp; CI'thpes)
Hamilton, Neil (Tatton)


Browne, John
Hampson, Dr Keith


Bruinvels, Peter
Hanley, Jeremy


Bryan, Sir Paul
Hannam, John


Buchanan-Smith, Rt Hon A.
Hargreaves, Kenneth


Buck, Sir Antony
Harris, David


Budgen, Nick
Haselhurst, Alan


Bulmer, Esmond
Havers, Rt Hon Sir Michael


Butcher, John
Hawkins, C. (High Peak)


Butterfill, John
Hawkins, Sir Paul (SW N'folk)


Carlisle, John (N Luton)
Hawksley, Warren


Carttiss, Michael
Hayes, J.


Chalker, Mrs Lynda
Hayhoe, Barney


Chapman, Sydney
Hayward, Robert


Chope, Christopher
Heathcoat-Amory, David


Clark, Hon A. (Plym'th S'n)
Henderson, Barry


Clark, Dr Michael (Rochford)
Hickmet, Richard


Clark, Sir W. (Croydon S)
Higgins, Rt Hon Terence L.


Clarke, Rt Hon K. (Rushcliffe)
Hirst, Michael


Clegg, Sir Walter
Hogg, Hon Douglas (Gr'th'm)


Cockeram, Eric
Holland, Sir Philip (Gedling)


Colvin, Michael
Hooson, Tom


Coombs, Simon
Howarth, Alan (Stratf'd-on-A)


Cope, John
Howarth, Gerald (Cannock)


Corrie, John
Howell, Rt Hon D. (G'Idford)


Couchman, James
Howell, Ralph (N Norfolk)


Cranborne, Viscount
Hubbard-Miles, Peter


Critchley, Julian
Hunt, David (Wirral)


Currie, Mrs Edwina
Hunter, Andrew


Dicks, Terry
Hurd, Rt Hon Douglas


Dorrell, Stephen
Jackson, Robert


Douglas-Hamilton, Lord J.
Jenkin, Rt Hon Patrick


du Cann, Rt Hon Edward
Jessel, Toby


Dunn, Robert
Johnson-Smith, Sir Geoffrey


Dykes, Hugh
Jones, Gwilym (Cardiff N)


Edwards, Rt Hon N. (P'broke)
Jones, Robert (W Herts)


Eggar, Tim
Jopling, Rt Hon Michael


Emery, Sir Peter
Kellett-Bowman, Mrs Elaine


Fallon, Michael
Key, Robert






King. Roger (B'ham N'field)
Pawsey, James


Knight, Mrs Jill (Edgbaston)
Peacock, Mrs Elizabeth


Knowles, Michael
Percival, Rt Hon Sir Ian


Knox, David
Pollock, Alexander


Latham, Michael
Porter, Barry


Lawler, Geoffrey
Powell, William (Corby)


Lawrence, Ivan
Powley, John


Lawson, Rt Hon Nigel
Prentice, Rt Hon Reg


Lee, John (Pendle)
Price, Sir David


Leigh, Edward (Gainsbor'gh)
Proctor, K. Harvey


Lennox-Boyd, Hon Mark
Pym, Rt Hon Francis


Lester, Jim
Rathbone, Tim


Lewis, Sir Kenneth (Stamf'd)
Rees, Rt Hon Peter (Dover)


Lilley, Peter
Rhodes James, Robert


Lloyd, Ian (Havant)
Rhys Williams, Sir Brandon


Lloyd, Peter, (Fareham)
Ridley, Rt Hon Nicholas


Luce, Richard
Ridsdale, Sir Julian


McCrindle, Robert
Roberts, Wyn (Conwy)


Macfarlane, Neil
Rossi, Sir Hugh


MacKay, Andrew (Berkshire)
Rost, Peter


MacKay, John (Argyll &amp; Bute)
Rowe, Andrew


McNair-Wilson, P. (New F'st)
Ryder, Richard


Major, John
Shaw, Giles (Pudsey)


Malins, Humfrey
Shelton, William (Streatham)


Malone, Gerald
Shersby, Michael


Maples, John
Skeet, T. H. H.


Marlow, Antony
Soames, Hon Nicholas


Mather, Carol
Speller, Tony


Maude, Hon Francis
Spicer, Michael (S Worcs)


Mawhinney, Dr Brian
Stanbrook, Ivor


Maxwell-Hyslop, Robin
Steen, Anthony


Mayhew, Sir Patrick
Stewart, Allan (Eastwood)


Mellor, David
Stewart, Ian (N Hertf'dshire)


Merchant, Piers
Stradling Thomas, J.


Meyer, Sir Anthony
Sumberg, David


Miller, Hal (B'grove)
Taylor, John (Solihull)


Mills. lain (Meriden)
Temple-Morris, Peter


Mills. Sir Peter (West Devon)
Thompson, Donald (Calder V)


Miscampbell, Norman
Thurnham, Peter


Moate, Roger
Vaughan, Sir Gerard


Moore, John
Viggers, Peter


Morris, M. (N'hampton, S)
Wakeham, Rt Hon John


Morrison, Hon C. (Devizes)
Waldegrave, Hon William


Morrison, Hon P. (Chester)
Walker, Bill (T'side N)


Moynihan, Hon C.
Wardle, C. (Bexhill)


Murphy, Christopher
Warren, Kenneth


Neale, Gerrard
Watts, John


Needham, Richard
Wells, Bowen (Hertford)


Nicholls, Patrick
Whitney, Raymond


Normanton, Tom
Wiggin, Jerry


Norris, Steven
Wolfson, Mark


Onslow, Cranley
Yeo, Tim


Oppenheim, Rt Hon Mrs S.
Young, Sir George (Acton)


Osborn, Sir John



Ottaway, Richard
Tellers for the Noes:


Page, Richard (Herts SW)
Mr. Archie Hamilton and


Parris, Matthew
Mr. Tim Sainsbury.


Patten, Christopher (Bath)

Question accordingly negatived.

Mr. Roy Hattersley: I beg to move amendment No. 3, in page 6, leave out lines 15 and 16.

The Temporary Chairman (Mr. John Forrester): With this it will be convenient to take the following amendments: No. 4, in page 6, line 16, leave out '1st June 1984' and insert '1st October 1984'.
No. 5, in page 6, line 16, leave out '1st June 1984' and insert '1st September 1984'.
No. 6, in page 6, line 16, leave out '1st June 1984' and insert 'lst January 1985'.
No. 7, in page 6, line 16, at end add
'or contracted before 13th March 1984'.
No. 8, in page 6, line 16, at end add
'excluding those contracts entered into on or before 13th March 1984'.

No. 20, in schedule 6, page 133, line 8, leave out part II.

Mr. Hattersley: As the evening wears on we shall discuss the desirability of VAT being levied or not on several specific sorts of premises or alterations to specific sorts of premises. We shall discuss whether VAT is appropriate for alterations to premises owned by charities, buildings of special architectural merit and buildings of various specified groups. The purpose of amendment No. 3 is at once more simple and general. It intends to negate the Government's intention to impose VAT on building alterations of any sort. It does that for several reasons—concern for the overall pattern of employment and economic prospects in the country, concern for the state and condition of the building industry, concern for the desirability of such an avoidable tax and concern with the effect of VAT on alterations in some parts of the United Kingdom which especially need housing improvement.
I shall start by describing the affects of the new tax, if it were imposed, on the construction industry and the economy of which the construction industry is a part. There are now more than 400,000 construction workers out of work according to the Government's figures, and 225,000 of those potentially productive workers have lost their jobs during the Government's term of office. Plant stands idle in builders' yards all over the United Kingdom. Building bankruptcies are now occurring at a record rate. In spite of that, this is the moment that the Chancellor has chosen to impose a new burden on the building industry.
The Chancellor estimates that the imposition of 15 per cent. VAT on all alterations will raise £450 million in a full year. I should like, first, to consider the unlikely hypothesis that the Chancellor is right. If he is wrong, quite a different set of considerations apply. They are not unique, but they are not the considerations that are appropriate to analysing the results of his intentions if his intentions are fulfilled. For the moment, I shall assume that the Chancellor is right and that £450 million will be raised. That sum is to be added to the cost of alterations. That £450 million will be an additional disincentive to the making of alterations. In the present economic climate, price elasticity in the building industry being what it is, no extra money will be spent. The £450 million which goes to the Revenue may not be spent on building, as was initially contemplated. The same amount of cash may be transferred from the client to the builder and the same total of building accounts will be published at the end of the year, but £450 million of that total will go to the Revenue instead of being used for productive work.
If there is a straight transfer from the builder to the Treasury, the fears of the National Home Improvement Council will be realised. Subsequent events are easily calculated. If building work is reduced by £450 million in real terms, 34,740 jobs will be lost. That will cost the Department of Health and Social Security £280 million in unemployment benefits. It will also mean a loss of almost the same amount to the Revenue from the reduction in income tax which would have been raised from employed building workers but which cannot be raised from unemployed building workers.
If the money works its way through, as the NHIC fears, the Revenue will collect £450 million, but it will pay out almost £400 million in compensation. In short, the proposal will create unemployment, lose capacity and provide far less for the Exchequer than the Chancellor's


superficial calculations. The exercise of imposing VAT on building alterations is a paradigm of the Government's economic policy.
Why does the Chancellor pursue such absurdities? Why does he attempt to raise revenue in this way, causing unemployment and involving himself in additional costs which almost compensate for the revenue which he hopes to raise? The building industry offers an answer to my rhetorical question. If its attitude to the new tax were not seen against its tragic background and if its condition were not tragic in general, it would be farcical to contemplate building industry employers turning to the Opposition for help. No group of employers has fed the Conservative party so consistently and lavishly and had its hand bitten so consistently and lavishly.
Tonight, I shall put that aside and, as requested, argue the industry's case against the Government's deprivation of this sector. I bring to the Minister's attention the reason why the Federation of Master Builders, in a positively poignant submission to the Opposition, suspects that the Chancellor introduced this irrational and illogical tax. The federation's submission of 16 March states:
It is the view of the FMB that the Chancellor has misled Parliament and the Country in his budget statement relating to changes in VAT on alterations to buildings.
The federation's charge is that, during his Budget speech, the Chancellor, while announcing the imposition of VAT, said that the alteration in the VAT regulations was intended to end bureaucratic confusion. He added that he hoped that it would raise additional revenue. He said:
First, alterations to buildings. At present repairs and maintenance are taxed, but alterations are not. The borderline between these two categories is the most confused in the whole field of VAT. I propose to end this confusion and illogicality by bringing all alterations into tax."—[Official Report, 13 March 1984; Vol. 56, c. 302-3.]
Yet that evening the Commissioners of Inland Revenue issued a press statement, which said:
As announced by the Chancellor of the Exchequer in his Budget statement, all building alteration work is to be standard rated for VAT from 1 June 1984. A number of other VAT liability changes affecting builders will also happen then.
The commissioners, with a frankness which the Chancellor would have done well to copy, recounted the other changes, which for some reason—about which it would be unparliamentary for me to speculate, and which only the Chancellor knows and has not revealed to the House—the Chancellor did not tell the House in his Budget statement. For instance, there is a substantial raft of additional building work which hon. Members will find difficult to classify in rational terms as alterations, but which are to be classified as such for VAT purposes.
7.45 pm
The obvious example is that of a detached garage built adjacent to a house but completed after the house. The Minister nods agreement. Although all hon. Members know than now, we did not know it when the Chancellor made his Budget statement. If a garage is built in the garden, at the end of the drive, perhaps many yards from the house, it is not a new building but an alteration. The Federation of Master Builders, looking at the clear illogicality and irrationality of the definition, said that it could assume only that this is the
penultimate step prior to the taxation of all new work.
Will the Minister make it clear whether the Chancellor of the Exchequer is preparing the way to impose VAT on all

new building work? What was his reply to the Federation of Master Builders, if he replied at all, when it expressed that fear?
If the Minister is, characteristically, reticent in describing the Chancellor of the Exchequer's intentions, I shall help him out of that vacuum by suggesting reasons which may have prompted the Chancellor to impose VAT on building alterations.
The Chancellor's first answer was that he wished to end the illogicalities — he meant irrationalities — of the present anomalies. He wished to end the anomalies between improvements, repairs and alterations. He therefore arranged it so that a garage built when a house was built would not be taxed, but the same garage built against the house in the same way a fortnight after the house was constructed would be taxed. Only a man of the Chancellor's sensitivity could regard such a tax as clearing up anomalies.
As the evening wears on, Conservative Members will draw attention to the preservation of listed properties and ancient buildings and to other anomalies concerning the number of facades on a listed building which can be changed inside or outside tax. A tax which falls on a building when one facade is renovated but not when more than one facade is renovated is not free from anomalies. Therefore, the Chancellor has not introduced a tax simply to clear the confusions which his logical mind finds repulsive.

Mr. John Gorst: In the right hon. Gentleman's garage example, has it occurred to him that it will call in question when a house is finished? If the house were finished but not the garage, one would presumably assert that the house was not finished until the garage was built.

Mr. Hattersley: The hon. Gentleman's ingenuity in such matters will be translated not into legislative action but into remunerative action in estate agents' offices and law practices. However, the Minister of State must tell us how that and many other anomalies will be overcome. We all know that the position which I described, and which the hon. Gentleman extended, can and will apply. I am glad that the hon. Gentleman, by implication, subscribes to my view that clarity and the absence of anomaly have nothing to do with the change, and I hope that he translates that support for my view into a vote for the amendment.
The Chancellor's second suggestion was that the proposal would raise £450 million in revenue. I have already assumed that that revenue might be raised, and I repeat that, were that to be the case, the effects on the building industry would be catastrophic, to the point of lost jobs and more bankruptcies. However, it is highly unlikely that this tax will raise anything like the amount that the Chancellor suggests is possible by the crudest and simplest calculation of adding 15 per cent. to the known alteration bills for last year.
The proposal is part of the Government's extraordinary exercise of increasing taxes at the same time as talking about reducing taxes. It is part of the increase in the total annual tax burden of £27,000 million which has come about as a result of action taken by a Government who came to power promising to cut taxes. In this case their strange insistence that they will reduce taxes by increasing them will have an even more bizarre result, because the £450 million that they promise will be the outturn of this


tax cannot conceivably be collected by the Revenue, for the obvious reason that building alterations are an ideal area for an extension of the black economy. Thanks to the imposition of VAT, work now done on contract and invoice will increasingly be done for cash, untaxed and unsupervised. That will result in shoddy workmanship. As all of us have seen in our constituencies when the black economy has come in and offered a quick building job—the job might have been quick but it was often badly done or even unfinished. It will result in companies—if "companies" is the right word — operating with a dangerous absence of respect for safety standards and building regulations. Indeed, the president of the Building Employers Confederation described the result of the tax as "penalising bona fide firms" and "benefiting the tax-dodging cowboys."
Those who will be penalised most are the small firms, for which the Government are supposed to have especially tender regard—the honest firms which rely on alteration work for a large proportion of their turnover and which send in their tax returns and pay their dues. Two things will happen: first, the 15 per cent. increases in their bills will result in a substantial reduction in work; and, secondly, their work will be further reduced because families carrying out work on their premises will turn away from the legitimate small builder and go to the black economy cowboy, pay in cash, and be exempt from the VAT levy.
The Minister of State will know—he must reply to this point—that the firms which will be savagely hit in future are already being hit although, theoretically, the tax will not apply until 1 June. This is another example of the Government introducing a retrospective tax. I realise that VAT inspectors will consider only certificates for 1 June and thereafter, and that the tax returns will relate only to that and subsequent dates, but I also know—as should the Minister of State—that much building work was contracted before the Budget in the belief that no VAT would be imposed. Suddenly, the £10,000 contract entered into and signed in good faith will cost £11,500. It is intolerable for the Government to say to builders and their customers, "You entered into a contract for one sum and the work has already begun — the men have been engaged, the raw materials bought and the plant moved to the site—and we, the Government, will now increase the price of the contract by 15 per cent."
I do not know how that can be justified. The Chancellor brushed it off by saying that the proposal offered the industry two or two and a half months' grace, but any hon. Members — there are many — who understands the building industry will know that two and a half months is the sort of period appropriate for the smallest jobs done in the most casual way. Anyone doing the sort of job likely to be caught by this measure started it long before the Chancellor announced the change and will now have to pay an amount which he did not anticipate and which should not be forced upon him.

Mr. A. J. Beith: The other side of the coin—it is happening at present—is that many builders are advising customers to pay in advance so as to get the benefit of the present VAT position, thus removing from the person who makes the payment any subsequent effective pressure upon the builder to complete work or to get on with that job as opposed to other jobs that he might have on his work schedule. Is this not another of the bad booms from which the building industry has

suffered—a short-term boom for a couple of months followed by a period of serious deprivation for the industry?

Mr. Hattersley: Capital allowances, which we shall debate tomorrow, will have almost exactly the same effect. It creates the suspicion that the Government want to create this short-term activity followed by a period of lassitude and then of depression. What the hon. Gentleman said is true. There are two problems for customers and builders. One is builders suggesting, or customers asking to make, early payment and therefore changing the rhythm and schedule of the work in the industry. The other is builders feeling that they must accept the early payment although they might not be sure how the contract, especially if there are variable terms for labour or material, will work out. The Chancellor, who parades himself as the great codifier of taxes—the man who will smooth the rough passages in tax legislation — should not have created all those anomalies, uncertainties and diversions.

Dr. Glyn: The right hon. Gentleman suggested two possibilities. I suggest a third—a deferral in the time by which the building should be completed.

Mr. Hattersley: I agree with that, but I must ask that hon. Members who wish to criticise the Government should do so during the Minister of State's speech rather than during mine. There are several ways out of this impasse, one of which is deferring the period. But that is not half as good a method as abandoning VAT on alterations altogether. That is the course that I urge and that I shall pursue in the Lobby tonight with, I hope, the hon. Gentleman's support.
The hardship, examples of which we have seen in constituency correspondence, will fall most desperately on areas that are least able to bear it. The increase in alteration prices will hit the inner cities. As the Government have cut capital expenditure on housing in the inner cities, poor misguided Conservative leaders of councils have said—they have certainly said it in Birmingham—that there might not be the same public capital spent on improving the inner city, but that under this Government private capital will fund the necessary alterations. This measure is a major disincentive to private capital filling the gap, and in areas with a high concentration of old property the effect on housing stock will be cataclysmic.
The inner cities and Wales have a high proportion of older property that will not be altered and, therefore, not improved. The potential decent lives of many properties that could be extended will not be extended, and the stock of decent housing will deteriorate. In short, we can say with certainty that VAT on building alterations will reduce the quality of our housing stock, increase unemployment and bankruptcy in the building industry, especially penalise the small firm, provide new incentives for tax dodging and new opportunities to dodge taxes and encourage shoddy building work. Its yield will be less than the Chancellor suggests, and its effect will be retrospective.
Not surprisingly, the building industry describes the new tax as a deplorable and savage blow against it. I look forward to hearing how the Minister of State can possibly justify this absurdity, and I look forward to voting against it.

8 pm

Mr. Christopher Hawkins: I rise to support amendment No. 3, together with amendments Nos. 6 and 8, which are in my name, and those others whose effect is similar. On amendment No. 3, I am in the company of distinguished Opposition Members because, by coincidence, the wording of my amendment is identical to theirs. There has been no plot of any kind.
I am a strong supporter of the Chancellor's Budget strategy. In a book published more than 15 months ago—hon. Members will be relieved to know that I do not intend to quote from it—I argued the need for Chancellors of the Exchequer to remove the distortions of the tax system to free the market economy to work efficiently and effectively so that it would not continue to work under the severe restraints of some of our more absurd tax laws.
I am glad that in this Budget the Chancellor has gone a long way down the road of removing restraints and anomalies. I also welcome moves towards a world in which far less time will be spent claiming allowances. In exchange, we shall have much lower corporation tax. I even welcome the strategy of a broader VAT base. I am told that if all goods were subject to VAT, the rate would be under 10 per cent., although my right hon. and hon. Friends will correct me if I am wrong.
What I do not welcome is the arbitrary choice of building extensions and alterations to be subject to the current high 15 per cent. VAT rate. If we are in the game of choosing which things should be taxed and which should not, this is one area that I would want to avoid taxing.
A decent home is a fundamental need for everyone. That has been a basic belief of the Conservative party for a long time. Whether a home is built now and to a large size initially, or is extended as a family's needs and incomes grow, it is illogical to tax the two things differently. Yet new buildings will incur no VAT while extensions will bear the full 15 per cent.
A major problem in Britain is that a large part of our housing stock is old and decrepit. House condition surveys have shown that many houses need refurbishment and new facilities such as bathrooms, and lack internal loos and so on. In some cases that amounts to the need for almost a complete rebuilding.
In 1982, in response to that problem, we announced 90 per cent. improvement grants. Now, not only have we cut improvement grants to 75 per cent. but we are also imposing 15 per cent. VAT. We are penalising precisely those home owners and building companies who until recently we were successfully encouraging to buy and do up old, rundown properties. In many cases, that policy put new life in the derelict inner cities. What we now plan is almost the reverse of our previous wise policy.
We shall also make worse the problem of the cowboy builder—cash on the nail, no questions asked and no tax paid. The work carried out by such people will be relatively even cheaper compared with reputable builders. If anyone doubts the seriousness of that problem, I should point out that the Director General of Fair Trading has received an enormous number of complaints about builders in the cash economy and only last year produced a comprehensive report. What we plan now will, in my view, make the problems worse.

Mr. Bermingham: Is it not also the case that when a cowboy builder is employed, the materials he uses are

usually of secondary quality? These are often imported materials that have been bought from the continental scrap heap rather than the new, first-class materials that are normally used by an authorised builder.

Mr. Hawkins: I agree with the hon. Gentleman. There is also some evidence that at the cowboy end of the trade large quantities of stolen, as well as second-hand, materials are used.
I am also opposed to VAT on extensions and alterations because building is the number one industry that we should be encouraging. If demand is increased elsewhere in the economy — as we have seen in recent years when average earnings have gone up faster than prices—that extra demand has been satisfied largely by imports. However, demand for building leads directly to jobs and incomes at home and results in more money going to the Treasury.
Another important feature of building is that it employs large numbers of unskilled workers. A look at the long-term unemployment figures is salutary. According to a survey that I have recently seen, about 75 per cent. of the long-term unemployed are unskilled, left school with no qualifications and have acquired none since. The microchip revolution about which we talk, and for which we hope and wait, will pass those people by, but the building industry offers worthwhile jobs for the unskilled to produce things that the country desperately needs.
I am also opposed to VAT on building extensions because it hits charities particularly hard in that they cannot claim it back. It also hits many independent schools that are registered as charities. I understand that it also hits universities, but probably not polytechnics. In short, in choosing which goods to tax rather than imposing a low tax on all goods, we are with VAT hitting precisely those things that we would not want to hit.
I wish to put three short case studies to the Minister and ask him to consider whether any concession can be made to deal with these problems. In doing so, I am grateful to the Building Employers' Confederation and the Royal Institution of Chartered Surveyors for the extensive briefings with which they have provided me and many other hon. Members.
Case study number one shows the penal effect that the retrospective imposition of VAT will have on a major inner city scheme. The central station, Manchester, scheme, just north of my constituency of High Peak, is designed to promote economic regeneration in the city centre of Manchester and to preserve an important listed building. The project is funded by the county council, by central Government through the inner city urban programme scheme and by the private sector. The total cost of that project is over £18 million. The new VAT burden on that will be about £2·5 million.
That additional cost was not contemplated by greater Manchester or by the eventual lessee. It was not known that this tax would be introduced. Everything was contracted before the Budget, and the retrospective nature of this legislation will be extremely harmful both to the inner city about which we want to do something and to the listed buildings that we want to preserve.

Dr. Glyn: Is my hon. Friend saying that the 15 per cent. tax will decrease the number of listed buildings that people are prepared to put back into commercial use because 15 per cent. represents the margin of profit?

Mr. Hawkins: Yes, I am saying precisely that, and I support my hon. Friend's good point.
My second case study illustrates the inequity of the retrospective nature of the legislation, the damage to conservation, the threat to heritage property and the impact on unemployment. The restoration of the old fish market in Glasgow is an initiative between public and private enterprise that has been designed to convert a major listed building into a leisure and commercial complex. This project will create 300 new jobs. The money for the project has been found with difficulty and the imposition of VAT on the alteration work will add an estimated £25,000 to the cost. The project manager has written the following:
I am seriously concerned that there is a distinct possibility of having to abort this scheme purely as a result of the proposed imposition of VAT on this listed building and I am sure that the last thing that the Government or anybody wants is for schemes such as this in inner cities, that will undoubtedly provide additional employment, to go to the wall.
The third case is from my constituency. It concerns a young couple who have sold their old house and borrowed up to their borrowing limit from a building society to convert a derelict barn which they have planning permission to convert into a home for themselves. That will create work locally and a nice home in keeping with the countryside of High Peak. They were given an improvement grant of £4,500 towards the cost of £50,000 and everything was agreed before the Budget, but the imposition of 15 per cent. VAT will cost them £7,500, wiping out the improvement grant by a ratio of nearly 2:1.
Amendment No. 8 concerns the retrospective nature of this tax and because of the cases that I have given, I hope that some hon. Members will feel that they can support this amendment and the others with a similar intention. Unless the amendment is made, contracts made before Budget day and not completed by 1 June will be subject to VAT of 15 per cent. People's transactions will be subject to VAT that they did not expect and cannot possibly avoid. That infringes a moral belief that the House should avoid retrospective taxation wherever possible. In this case, it is possible by simply exempting contracts made before 13 March. The alternative way would be to postpone the introduction of VAT until, say, the end of the financial year, which is mentioned in another amendment, and give time for these projects to be worked through.
The director of a major property company, who until he retired recently was a director of a major national building company, is also a trustee of a large charity for handicapped people. He has given me a case. The property company of which he is a director will probably be able to avoid VAT by paying in some form of prepayment deal before 1 June. The charity, however, is at the moment doing a £600,000 conversion on a large house in Glasgow, and the VAT on that will be £90,000. It has not yet managed to raise the money for the £600,000 conversion, but hopes that it will have done so by the time that the work is completed. The charity certainly does not have £90,000 to do some sleazy deal to prepay by the chosen date of deferment. It does not have the money and cannot get it.
Therefore, I ask my right hon. and hon. Friends to consider the impact of this provision on charities, on conservation, which will be badly hit and on which we should make some concession, and on contracts made before the Budget. To defer the introduction of VAT will solve many problems. The cost of deferring to the end of the year might be £100 million or £200 million. To normal human beings such as we, earning a few hundred pounds

a week, that sounds a lot of money, but it is peanuts when compared to GNP. It is less than one tenth of 1 per cent. of Britain's GNP. If we save that money, no statistician will even be able to measure that we have saved it.
To defer the tax to 1 December will also lead to quite a considerable building boom, and to more jobs and more revenue for the Treasury rather than the loss of income that will result from taxing an already hard-hit industry.

Mr. Gordon Oakes: I congratulate the hon. Member for High Peak (Mr. Hawkins) on a courageous and knowledgeable speech. I only wish that the Chancellor of the Exchequer, before he framed these proposals for VAT on alterations, had at least consulted the industry to avoid the mess that he has created with these proposals, particularly schedule 6.
I agree entirely with what my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) said about the disastrous effect that this will have on the building industry, and particularly on small builders. Thousands of jobs will be lost and there will be hundreds, and possibly thousands, of bankruptcies. This is from a Government who, as my right hon. Friend said, pride themselves on the attention that they give to small businesses, and particularly to the small builder. No section of industry could have been more shabbily treated over the past four years by the Government whom they helped to elect than the small builders.
There is also the problem of the time factor of 10 weeks. We are not dealing, as we did with previous amendments, with a retail industry, for which one can impose a date a few weeks in advance and say that tax will be imposed from then. We are dealing with the construction industry, in which weeks, and sometimes months, elapse between contracts being signed and the execution of the work. That is not because of any laziness on the part of the builders, but because they have problems such as getting the right supplies, the right materials or the design that the customer wants and for which the builder has to wait. There is the flow problem of labour and getting the job done on time. There is also the fact that very often, particularly when the work is for central heating or double glazing, the customer specifies that although he enters into a contract in December, January or February, the builder should not do the work until June, July or August. That is done for the sensible reason that he does not want a gaping hole where the window should be in the middle of winter. Therefore, he wants the builder to do the work in the summer months.
All these people will pay an extra 15 per cent., with anything between £300 and £600 being added to an ordinary, simple double glazing contract. This tax has been imposed out of the blue by the Government. The industry and the customers knew nothing about this on 12 March. Surely the Government should consider the amendments tabled by the hon. Member for High Peak and either extend the date to 1 January 1985 or, at the very least, exclude all contracts entered into before Budget day, as has been suggested by other amendments. That would stop this tax from becoming retrospective; something which we deplore in all legislation, particularly fiscal legislation.
I also deplore the fact that the Chancellor has tackled the matter in a blanket and indiscriminate way, as several of these amendments clearly show. For example, no


consideration has been given to the fact that many churches, many charity buildings and many historic buildings need these alterations or they will fall down, and there is also an amendment about this effect. Did the Chancellor think about this? What is the point of the Government paying grants to extend the life of historic buildings and churches on the one hand and taking 15 per cent. back with the other in VAT? It makes no sense.
Worse still is the problem of the disabled, and there are starred amendments down from the hon. Member for Exeter (Mr. Hannam) and my right hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley), both of whom clearly have a passionate interest in the disabled. The Government provide grants and invalidity benefits, and the local authorities give grants to improve the lifestyle of the disabled by various improvements in their homes. The improvement may be a lift, or something much more simple, but it transforms the life of the disabled.
Under their blanket proposals the Government are giving no consideration to the fact that the disabled will pay 15 per cent. VAT. Again the Government are giving with one hand and taking away with the other. Moreover, they are taking it away from those most unable to pay what is for them a levy on the necessities of life, not some luxury. On the one hand the Government realise that such improvements are necessary, desirable and essential, and on the other they proceed to tax them. The Treasury and the Chancellor have not even thought out the implications of this blanket imposition of VAT.
The Government spend hundreds of millions of pounds on advice, on the energy efficiency office, and on grants to assist people in Britain to conserve energy. That same Government then tax everyone who is rash enough to follow their advice. There is a tax of 15 per cent. for installing the means to save energy. That must be a crazy policy. If the Chancellor were to consider other European countries, he would see that almost invariably energy efficiency products are safeguarded.
Central heating is singled out for special treatment in schedule 6 on page 134. Other forms of heating such as stoves, cookers and so on may escape, but space heating and water heating are singled out for the 15 per cent. treatment. The industry could show the Chancellor a direct correlation between the installation of central heating between 1979 and 1982—the figures for 1983 are not available—and the reduction in the use of all forms of energy. If that continued there would be a tremendous energy saving, yet anyone who has the temerity to install central heating in his home, despite the fact that he is saving energy and improving his lifestyle, must pay a tax of 15 per cent.
I well remember that when I was Under-Secretary of State for the Environment and we discussed rating revaluation, Conservative Members to a man pointed out how wise it was to install central heating and how wrong it was to increase the rateable value of a person's home because he had installed central heating. Although I argued against that view, I had a sneaking sympathy for it. If they think that I was hypocritical, how hypocritical are they for imposing 15 per cent. VAT on central heating?
There is no doubt that double glazing has a considerable energy saving effect. It has been said that if this VAT is imposed the principal firms—the good, reliable and

responsible firms—will lose contracts to the cowboys. There is no doubt about that. People will go to the cowboys, not only to save the 15 per cent. VAT, but to cut corners in other directions. The industry is worried not only about the loss of business but about the loss of reputation that will result when someone goes to a cowboy and finds that the double glazing is not efficient or effective. They will blame not the cowboy but the double glazing industry. Therefore, a whole batch of customers will be lost.
I do not know whether the amendment that has been tabled by the Liberals will be called, but if it is I shall vote for it. It is a sensible amendment which seeks to exclude anything relating to energy efficiency from the effects of this VAT.
The small owner-occupier, the darling of Conservative Members, the little man who buys an old house, does it up, improves it by installing central heating and double glazing, will be hit hard in whatever direction he may travel. Not only he will be hit, but also the many thousands of people who are locked into a system of electric heating installed in the early 1960s before the energy crisis in council houses, who cannot afford to turn on the heating in the depth of winter because of their fear of the electricity bills that will result. I hope that some of the £200 million which the Chancellor hopes to raise from this tax will go back to local councils in order to give some protection to those people, usually old people, who find themselves locked in that energy trap.
What has the Chancellor got against fitted kitchens? According to the schedule, it seems that if I install fitted wardrobes or cupboards in my house I do not pay VAT, but if my wife installs a fitted kitchen VAT must be paid. Fitted kitchens are the trend at the moment among the very people that Conservative Members seek or pretend to encourage—the small chap buying his house whose wife wants to install a fitted kitchen.

Dr. Keith Hampson: I may be wrong, but I think the right hon. Gentleman will find that VAT now applies to all white furniture fittings in houses.

Mr. Oakes: No doubt the Minister will correct me if I am wrong, but the last paragraph of schedule 6 is ambiguous. It talks about fitted furniture other than fitted kitchens. Fitted kitchens seem to be singled out for special treatment. Ladylove Ltd. is a firm in my constituency well known in the north of England for the manufacture of good fitted kitchens. It has experienced considerable difficulties because of the lack of building in Britain due to the recession. It has had to shed labour but has tried to keep going. This could mean the end of it.
I plead with the Government, between now and Report, at least to look at the anomalies that this measure creates for the disabled, churches and historic buildings, the kitchen and furniture industry and, most particularly of all, the energy saving industry in Britain.

Sir William Clark: It is a pleasure to follow the right hon. Member for Halton (Mr. Oakes). He argued against the imposition of the tax. The debate has revolved around two aspects—those hon. Members who want the imposition of the 15 per cent. tax withdrawn, and those who think that 13 March is far too rigid a date. I fall into the latter category. I cannot see how the Government can justify such retrospective legislation.
There is no point in baulking the issue. Many contracts in the building industry are entered into, as many hon. Members have said, long before the work starts. To give an extension to 1 June—a couple of months—means that few contracts that were entered into before 31 March will escape the tax. As previous Chancellors have done, where we are changing a tax—as indeed we are, on the composite rates of banks—one year's notice should be given to the taxpayer. Instead of amendment No. 3, which is similar to that tabled by my hon. Friend the Member for High Peak (Mr. Hawkins), I should like to see contracts entered into before 13 March excluded from this tax of 15 per cent. I have no connection with or vested interest in the building industry, but there will be tremendous argument within the industry in determining what is a new building and what is not. My hon. Friend the Member for High Peak has given excellent examples of the various anomalies. I can give the further example of a school which happens to be a very good grammar school, and is a charity. It intends to put up some new laboratories for microchips, computers and so on in the grounds of the existing school. If the school was to buy some land the other side of the road, and erect the buildings there, I presume that would be regarded as a new building, but, because the building is to be erected in the grounds of the present school, it will be subject to the tax. A total of £7 million charitable money will be spent on it, which means that the bill will go up by almost a further £1 million. I have no vested interest in the school. It is not in my constituency, but is in the constituency of my hon. Friend the Financial Secretary to the Treasury. In his absence, I plead for him on behalf of his constituents. The Whitgift school will be hit very hard.
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Another example that I can give, again of a charity, is a church that needs restoration and a certain amount of improvement. An appeal was launched six to nine months ago for £150,000—not a large sum. It so happens that I was asked to be one of the patrons of the appeal to help raise some cash. The Archbishop of Canterbury, Mr. Speaker, and the Mayor of Croydon are also patrons. Again, I have no vested interest. Croydon parish church has raised £145,000, and has approximately £5,000 more to raise. However, the imposition of the 15 per cent. tax means that Croydon parish church appeal will need another £15,000. Of the £150,000, roughly two thirds was to go to improvements calculated according to the various grants from the Department of the Environment. What does the parish church do now? The constituents of my hon. Friend the Financial Secretary to the Treasury and the congregation that attends the Croydon parish church would surely expect Treasury Ministers to examine the matter.
I cannot understand why 13 March is sacrosanct. The two cases that I have given—certainly the case of the church—should surely be treated on their merits. If the Government say that they are unable to give a year's notice, as has been done in the case of the composite rate, which I know will mean a diminution of this year's revenue, surely they can say that between now and Report they will give an undertaking to look sympathetically at cases like Croydon parish church, and the many other similar cases.

Mr. Campbell-Savours: If the Government do not get the money that they intend to raise from the imposition of

VAT, how else will they get it to pay for the capital transfer tax reductions that the right hon. Gentleman seeks in the Budget?

Sir William Clark: I cannot see that that is relevant to what I am endeavouring to argue, but perhaps I have not made myself sufficiently clear, and the hon. Gentleman would like me to repeat my arguments. I was talking not about capital transfer tax, but about the indirect retrospection in this tax. I hope that my hon. Friends will give an undertaking to look at this again between now and Report, and consider whether each case can be judged on its merits. The Government obviously could not give an open-ended commitment that any contract entered into before 13 March was exempt from the tax. A time limit would have to be put on it, which I suggest should be the end of the fiscal year.

Mr. Gorst: Does my hon. Friend not fear that, if the Government are unsympathetic to what he seeks, this objectionable principle of retrospective taxation will mean that in future customers and suppliers of the building industry will have to make their arrangements subject to the possibility that the Government will make further retrospective tax impositions, and that therefore all building contracts will have to be subject to there being no changes in taxation?

Sir William Clark: My hon. Friend makes a valid point. Most building contracts to my knowledge have an escalation clause to cover possible changes in the rate of VAT. However, when a contract has been signed, everybody assumes that the rate of VAT will not change. Consequently—to return to the case of the church—the church, which has signed the contract, is then subject to another 15 per cent.
This is a serious matter for business. The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) raised the question of what is and what is not a new building, which we shall consider subsequently. In the case of listed buildings, it is crazy for the Customs and Excise to say that, if one is constructing a building and one leaves one small wall up, it is a new building, but that if one leaves two walls up, it is not a new building, but is an extension of a building. How does one go about building a corner site? I do not think it is right that any Government department—for example, Customs and Excise—should interpret a Bill which is in many cases ambiguous, and leads to anomalies. The guidelines to what is and what is not a new building should be laid down in Committee.
I hope that my hon. Friends have also considered the effect on the rating system and rating costs of the country. If, indeed, the enveloping goes on, when there are grounds for it, albeit that there is a reduction from 90 per cent. to 75 per cent., the 75 per cent. will be 75 per cent. of the improvement costs plus 15 per cent., so that in grant it will cost more. What about contracts between public departments and builders? They have entered into a contract, and they will now pay another 15 per cent. Will the money be made available within the budget of the Consolidated Fund to increase the amount of cash available to the Department to alter whatever the building is? This matter should be examined carefully between now and Report, because many anomalies will arise.
It is regrettable that insufficient consultation took place on the clause with the industry concerned. I have no vested


interest in the building industry, but it is common sense that, if a rigid date is to be set for the imposition of the tax, one should look behind that date to identify the implications. Hon. Members on both sides of the House have endeavoured to point out some of the anomalies. When my hon. Friend replies, I hope that he will give an assurance that between now and Report he will consider whether each case might be treated on its merits, otherwise extreme hardship will be suffered because of retrospection.

Mr. Beith: I hope that it is already apparent to the Minister of State that he has got things wrong. I also hope that it is already apparent to him that there is very little support in any part of the Committee for the package on VAT that he is putting forward—least of all for the proposition that he has cured some terrible anomaly. In fact, he has created far more anomalies than he started with. I hope to join others in persuading him that the proposal to extend VAT to building alterations is wrong. He has clearly created a chain of anomalies that is far greater than that which existed when he dreamt up this notion.
What, if anything, could the Government do at this juncture, with our economy in the state it is, which would be particularly valuable? I believe that they could maintain and improve our existing building stock. Of all the measures that a Government might take to deal with the present economic situation, what has a fairly rapid effect on the generation of employment and the wide distribution of employment opportunities throughout the community? The answer is: measures that develop and sustain the building industry. On both of those counts, the proposal to extend VAT to building alterations must surely stand condemned, because it attacks one of the areas of activity in which the Government can most readily assist the country at a time of high unemployment, and can most readily direct that assistance so that it is not spent on imports or on measures that do not go directly to the communities affected by such problems.
The Government have made a disastrous mistake in choosing to carry out this switch policy. I sincerely hope that before we have completed our consideration of the Bill, that feature of the Budget's proposals will be substantially, if not totally, changed. Rehabilitation of our building stock is one of the best things that we could be doing at present; and inviting the development of the black economy is probably one of the worst things that any Treasury Minister could do. Indeed, that is another facet of the problem. Why on earth have we got Treasury Ministers before us, inviting us to support proposals that will make it more tempting for private citizens to use cowboy operators in order to avoid a heavy tax imposition? The incentive is being given to go through the operator whose transactions are in notes, not cheques, whose accounting is done on the backs of envelopes and who does not use bills of which copies are kept. That is what is likely to happen as a result of this measure.
Of course, the existing VAT provisions on building work already present problems, and VAT on repairs presents problems to some of the groups about which hon. Members have expressed concern tonight. For example, the existing VAT on repairs is already a problem for churches and village halls. However, the problem will be

made far worse by the imposition of 15 per cent. VAT on building alterations. I ask the Minister of State to look at the characteristic problems of church and village halls, which he has no doubt come across in his constituency work. Indeed, all hon. Members attend functions in them. Such buildings were put up 30, 40 or 50 years ago and do not have adequate modern toilet facilities. Therefore, substantial alterations have to be carried out to ensure that there are proper toilets to which the disabled also have access. There are buildings in which there are no decent hygienic kitchen facilities, and substantial building alterations have to be carried out in order to provide them. Voluntary organisations in towns and villages all over the country are saving or raising money to carry out such alterations, yet they now face the prohibitive burden of additional costs being incurred on basic community buildings such as village and church halls.
The burden involved in repairing such buildings will now be made worse. The imposition of VAT on alterations will affect them drastically. Of course, in those areas where all such facilities are directly under the wing of the local authority, the position will be different. But why are the Government imposing a penalty on those areas where voluntary effort is providing many basic essential community facilities? The Government are telling local authorities, in effect, that they will have to step in and provide all the village halls and basic social facilities in their areas, because they, the Government, intend to penalise voluntary effort and to make it more expensive for volunteers than for local authorities to do the job. That is an absurdity.
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In supporting the amendment, I wish to turn to its implications for our heritage of historic buildings. We can deal with the problem by way of later amendments. I welcome the fact that the hon. Member for Rutland and Melton (Mr. Latham) has such an amendment on the Order Paper. I shall certainly support it. I hope that, if it has to be pressed to a Division, many of his hon. Friends will support it, too. However, I also hope that we may have some indication at this stage that the Government will reconsider their attitude to imposing VAT on building alterations. When the whole series of specific problems is considered, it is clear that the answer is that the Government should not impose VAT on building alterations, and should not place the crushing burden on the building industry and on the very wide range of employment that it provides. That is the route that they should take, but, if they do not, we must look to more specific amendments.
We have recently been through a period of considerable change of public policy in the direction of retaining our heritage of buildings and of retaining and adapting existing buildings instead of demolishing and replacing them. That has happened at many levels and in many different types of building. Big country houses have been adapted into flats for the elderly and so on when they are no longer suitable as residences and can no longer be maintained on that scale. Next week, His Royal Highness the Duke of Gloucester will visit my constituency to look at just such a project at Belford Hall in Northumberland. That 18th century house, which has been derelict since the war, will now, we hope, be restored to socially valuable use by means of extensive adaptations. We hope that some of the work will have been started quickly enough to avoid the


worst of the VAT imposition. But that house is typical of the many projects that this proposal will hit so very hard. Sensible use is being made of the building. It is the source of such pride that it is most appropriate that a royal visit should be made to it. Indeed, the Duke of Gloucester has taken great interest in and visited such projects in many parts of the country. It is appalling to see such projects hit by this proposal.
Again, in Berwick-upon-Tweed, which has an enormous number of historic buildings, we pioneered the idea of the revolving scheme or trust—the Historic Buildings Preservation Trust—which buys houses that are falling derelict and cannot be maintained, adapts them for modern use, sometimes by subdividing them, and then releases them on to the market. The funds are then used to restore other buildings. Without that sort of thing, many of the buildings that are such important features of the historic town centre would have decayed to the point at which there would have been no alternative but demolition. Yet this high level of VAT would also be imposed on those projects. In some areas, workers' cottages, which are too small for modern use, have been adapted, put together in pairs and turned into single dwellings. Bathrooms and other facilities have been added to them. In such ways, part of the traditional fabric is maintained in town centres and at the same time decent housing is provided.
Earlier, I mentioned that the existing VAT provisions led to great difficulties in the maintenance of churches and chapels. Demolition is now a very serious threat. During Question Time today the hon. Member for Wokingham (Sir W. van Straubenzee), answering questions on behalf of the Church Commissioners, said that he was able to point with some pride to the fact that the Church of England had demolished relatively few buildings. However, the threat was there, and many hon. Members pointed out that the imposition of VAT could threaten that record. Indeed, the record is not so good for the many non-conformist chapels, which are important features of the architectural scene in many of our towns and cities, particularly in the north of England. It has simply not been possible to maintain some of them, and until recently their historic value and significance had not been greatly recognised.
All that has changed. During the past few years such buildings have been adapted for use by the churches, or adapted for alternative use. Let us take, for example, the case where the Church wants to continue to use a big historic building but cannot do so unless it adapts it to modern conditions. For example, the area used for services may need to be reduced in size so that it can reasonably be heated. Many churches make such alterations. They may put in a ceiling where previously there had been a lofty roof, or adapt the building so that the ground floor is used for other purposes and a first floor is created to be used for worship. Such adaptations have been carried out in many churches. In that way valuable buildings are retained both for worship and for other community purposes.
The churches main committee has produced many examples of such projects which I hope have already been drawn to the Chancellor's attention, some of which are on quite a big scale. An example is the Victorian church in Richmond which is being converted to provide facilities for the elderly at a cost of £383,000. It will cost an extra £10,000 to provide those facilities when VAT is imposed.
Another example is the Methodist church — a listed building — which has been adapted at a cost of £242,000. About £100,000 was raised locally. Another £22,500 will now have to be provided for that project.
Some churches, no longer required for worship because the local population is now too small, are being adapted for alternative uses. Such projects are threatened. In the centre of Newcastle the fine All Saints church overlooking the quayside has been adapted, at considerable cost, as a hall for a variety of public uses. Such projects will be severely hit.
Other types of building will also be affected. Dock warehouses in cities such as Liverpool are being adapted for alternative use instead of being demolished. Such projects make a contribution to inner city regeneration. They provide facilities and opportunities for all sorts of things that we want to encourage. They retain valuable skylines. In the countryside, farm buildings are being adapted to provide workshops for small industries and crafts. Such projects are threatened.
What is the alternative? We are talking about churches and voluntary organisations with limited resources arid about projects in which a substantial financial contribution is involved. The Government are making the alternative of demolition attractive. They are distorting the free market. Demolition will be more attractive than retention and conservation. They are creating the antithesis of the free market philosophy as well as the antithesis of the public policy to retain buildings.
The Department of the Environment produces beautiful booklets describing our record in adapting buildings for alternative uses. It has produced booklets on the use of farm buildings and churches. They appear at international exhibitions as demonstrations of Britain's record on the conservation of buildings. I have been chairman of a sub-committee in the Council of Europe which deals with the conservation of historic buildings. I have been able to point with pride to Britain's record. But what do I now find? All the organisations which have worked so hard are threatened with the body blow of the imposition of VAT.

Mr. Stephen Ross: We support the setting up of the Historic Buildings and Ancient Monuments Commission for England under Lord Montagu of Beaulieu. Is it not sad that it should face a 15 per cent. surcharge?

Mr. Beith: I agree. The Prime Minister organised a reception a few weeks ago to give the commission a good send off, but gloom was cast over the occasion by the known threat that faces the conservation movement. Treasury Ministers must recognise that they are flying in the face of the Government's declared policy.
Even at the minimum level, when features of listed demolished buildings are retained a threat exists. Often the last resort, when a building is threatened, is to retain some elements of the facade, a staircase, or some other feature of historic interest.
If the retained items are of any scale or significance arid amount, for example, to two walls, the ultimate absurdity applies in that the new replacement building will attract the 15 per cent. VAT. The imposition is a body blow to the conservation and retention of historic buildings to which the Government have given their support and encouragement in other measures.
I beg Treasury Ministers to think again about the impact of the tax upon historic buildings, churches and voluntary


organisations. The proposal is nonsense and should be abandoned. If it is not abandoned as a whole—nothing would be more helpful to the building industry than that—at least we must have some exemptions for the types of projects that I have described. Treasury Ministers are flying in the face of common sense and public policy. They cannot be allowed to get away with it.

Mr. Michael Latham: I am grateful to the hon. Member for Berwick-upon-Tweed (Mr. Beith) for supporting my amendment No. 21 hours before we get to it. I shall make only a brief intervention in this general debate. I shall leave specific points about heritage to our debate on amendment No. 21.
I declare my long-standing interest in building as a director of a fairly large private housebuilding company. Most of that company's work is and will continue to be zero-rated since it is involved in private house construction. It is concerned with some conversion and rehabilitation work which will become positively rated.
I do not agree with the total resistance to clause 10. I am not opposed in principle to VAT being imposed upon private domestic extensions. I appreciate that it is an unwelcome step, but I see no logical difference between a householder having major repairs done to his house, such as putting on a new roof on which he must pay VAT now, and his having a new sunroom, porch or granny annex which was zero rated. Obviously, I should have preferred the Chancellor to go the other way and to zero rate all repairs instead of positively rating domestic alterations.
I remember when the Green Paper on VAT was produced by Lord Barber when he was Chancellor of the Exchequer in 1971. I was a member of the National Federation of Building Trades Employers and helped to draft the federation's initial comments. We assumed that the best that we could hope for was that new private housebuilding would be zero rated. We were pleasantly surprised when the Chancellor proposed that all new construction should be outside the tax net. Naturally, the federation criticised the inclusion of domestic repairs then and has done so ever since. The amount of revenue obtainable from VAT on repairs has become so substantial over the years as to make its removal less practical. We must take action against the cowboys.
I am not opposed to the imposition of VAT on the installation of domestic double glazing. I appreciate the arguments about energy conservation, but double glazing cannot be regarded as an essential domestic item. It is entirely the choice of the householder whether to order and install it, and it adds several hundred pounds to the value of a property. If VAT is to be chargeable on any form of building work that cannot be unreasonable.

Mr. Bermingham: Is the hon. Gentleman aware that building regulations throughout the whole of northern Europe require the installation of double or triple glazing, not only because of energy conservation but because of its effect on the life of a property?

Mr. Latham: Double glazing is a pleasant, additional luxury and is not essential.

Dr. Oonagh McDonald: Oh, come on!

Mr. Latham: It is no good the hon. Lady saying that, because the vast majority of people do not have double glazing and have no plans to install it.
My objection is to the speed of implementation of the measure. The date of 1 June is too soon. It is leading to chaotic scrambling to try to get things done before then. It means also that work that was contracted before Budget day is threatened with VAT being imposed when the client had not taken the extra imposition into account before placing his order.
I wish to quote the president of the Leicestershire and Rutland Society of Architects, Mr. John Anderson. He said:
the members of this society consider it their duty on behalf of their clients to record their dismay at the way this tax has been imposed, which shows a complete lack of regard for those who are committed to a legal and binding contract for alteration work which would not have attracted VAT, which still has several months to run, and cannot possibly be finished before 1st June. The extra money has not been budgeted for, and in the case of a charitable trust would not be easily obtained. However, if the work stopped they would have to meet a claim for loss of profit.
A smaller builder in my constituency wrote to me on 30 March, two and a half weeks after the Budget. He said:
We have to date received several cancellations for this type of work which cannot be started before 1st June. Several other jobs are now being trimmed to bring the final figure, including the new VAT charge, within the original estimate of cost.
He raised his work force from seven to nine during the last 12 months but he now gloomily foresees having to make some redundancies.
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When it met some hon. Members recently, the Glass and Glazing Federation implored that the date of 1 June should be moved back at least one month so as to prevent the cancellation of existing contracts or at least having them caught by the tax. It is fair to ask the Chancellor to take that step. In my amendment, I have chosen to move the date back three clear months, which would allow five and a half months from the Budget. If the Chancellor accepted my amendment, many domestic extensions would be completed as they could be done within five and a half months or less. Existing contracts for double glazing could be met without great difficulty.
I prefer, in fact, the amendment of my hon. Friend the Member for Croydon, South (Sir W. Clark), which would exclude all work contracted before 13 March. If he presses that amendment I will vote for it. My amendment would alleviate much of the worst hardship and remove much of the retrospective element.
Whatever the outcome of the debate, the time has come when some firm action against the cowboys in the building industry can no longer be delayed. Everyone knows that the number of fiddles and rackets has reached alarming proportions.

Mr. Austin Mitchell: This will make it worse.

Mr. Latham: I know that the hon. Member cannot make a speech, but if he wishes to stand up and say something I shall gladly give way to him.
Small reputable builders complain continually about preparing estimates for domestic improvement work, often funded by improvement grants and backed by loans from building societies or banks, and of then seeing the work go to an unregistered trader who pays no VAT and probably no other tax.
The substantial and practical report last June of the Director General of Fair Trading, which I raised in an Adjournment debate a couple of months ago, has not been implemented by the Government. It should be forthwith.
If some firm action is not taken now against cowboys by the Government, domestic alteration work will become like the "Gunfight at the OK Corral" with every cowboy blasting away at reputable builders. There will be an endless series of rip-offs, consumer fiddles and shoddy work and more and more constituency cases for hon. Members or trading standards officers.
I implore Ministers to take this matter seriously and deal with it urgently. I do not pretend to know much about esoteric tax matters, but I know a bit about the building industry, and the time to act is now.

Mr. Bermingham: The hon. Member for Rutland and Melton (Mr. Latham) prays a case in aid of the cowboys with his suggestions. I declare an interest as a lawyer, but an even greater interest on behalf of my constituency, where much of the glass used in ordinary domestic building and double glazing is made.
When one began to study the subject of VAT on property alterations one had to ask oneself a number of questions. In the debate on the previous amendment we heard the Chief Secretary say that the proposal was introduced to bring us into harmony with Europe. I concede immediately that double glazing and alterations are subject to VAT in Europe, but in my view and, I am sure, in the view of many hon. Members, we do not need to follow exactly and slavishly much of what is sought to be done in Europe.
It is bad enough that we have had to harmonise our beer and wine prices. It is disastrous that we have had to bring in VAT on cooked foods because the Netherlands and everyone else has it. Yet here we are banging VAT on to double glazing, alterations and all other sorts of building work, to the detriment of our historic buildings and churches, but above all to the detriment of our building industry. It will, of course, bring us into line with the great god called Europe, to which we are becoming so slavishly subservient that the time is coming when some of us must cry, "Stop."
Let us stop following the practices of a continent which has a different set of rules and regulations. Before Ministers seek to change the rules they should first thoroughly investigate the subject, because in this legislation there are so many ifs, buts and ands that it will be a lawyer's paradise and a builder's nightmare.
Several hon. Members have pointed out how this legislation will provide almost an open invitation to the cowboys to enter the field. It will not just be the cowboy saying, "I will do those repairs for twenty quid in my back pocket." Extensions and other major works will be undertaken by the fly-by-night builder—the person who cannot be traced or sued and who rarely finishes the job, anyway—using substandard materials.
The hon. Member for Rutland and Melton said that he was a member of a substantial private building firm. He must be aware that when the cowboy goes to work he does more harm than many people realise to the person for whom he does the job. About two years ago I was asked to defend a cowboy builder who had installed a central heating system. The radiators had come from a scrap yard in south Yorkshire. They did not just have holes in them and leak; one of them blew up and the elderly person who had sought to have the job done "on the cheap" found that not only was there a heating system that did not work, but a flooded house with £2,500-worth of damage to one room alone.
That is the quality of service that one invites when one makes it attractive for the cowboy to work for cash that goes straight into his back pocket. The substandard materials are not just radiators, but even bricks. Hon. Members perhaps have no idea of the number of demolition sites that are raided for secondhand bricks, to be used by cowboy builders; for window frames which, when painted, look as though they might recently have been manufactured but which contain wood well past its useful life; for glass abstracted from old greenhouses and used in cheap and shoddy jobs, carried out by "the little man" who wants payment in cash in his back pocket. That is the scope of the problem which the Government are likely to expand by measures of this sort. The cheap and shoddy job will become part of a growth industry in building, all because 15 per cent. is being added to the price.
The problem does not stop there. Much has been said, for example, about energy conservation. It is ludicrous that one Minister should be travelling the country telling people to conserve energy while another Minister, the Chancellor, is making it almost impossible for people to follow the first Minister's advice. Then a third Minister, while giving some grants, is cutting back on grants, and such grants as are available will be diminished further because the Chancellor is sticking 15 per cent. on the price of energy conservation products.
We live in a country which, at the current rate of double glazing, will take 121 years to reach the level which Denmark will reach in 2·9 years, when that country will have completed its double glazing programme, yet its climate is not all that different from ours. France will take 15 years to reach that stage, and its climate is better than ours.
Double glazing is not a luxury. It is a fundamentally important part of the construction of any property. There will come a time when the British building industry will wake up to the fact that it is worth while, not only as a selling point, to install double glazing in the construction of new houses. It not only enhances the quality of life of those who live in them, but improves the durability and life of the property.
I do not ask the Committee to take my word for that. Instead, I invite it to consult the experts. The experts take the view that I have outlined., that is why the glazing and building federations have been considering the problem. Why else has there been pressure to improve construction standards for double glazing units and the standard of the glass that is used in the first place? Why else has there been pressure to increase the thickness of glass walls?
The Budget will destroy the jobbing builder, or small builder, but it will do more harm than that. It will make it more expensive to install double glazing units, for example, and it will make the units themselves more expensive. The imposition of VAT will increase the cost of the units, and in any production system it is the bulk of units produced that reduces unit costs. That is a factor that is often forgotten. The unit costs of glass, bricks—obviously bricks are needed for extensions — double glazing units and window frames will increase because we shall be producing fewer of them and because demand will fall. Throughput might remain the same, but the number of units will fall.
I declare a strong constituency interest, because one of the great problems facing the glass industry, especially sheet glass manufacturers, is competition from the


continent. The degree of import penetration increases and if we are to compete with the importers we must keep down unit costs. I accept that French, Belgian, German and Swedish glass will be subject to 15 per cent. VAT at the point of sale, but the unit costs of continental manufacturers are based, like ours, on current production levels. If our unit costs increase because we are producing less glass, we shall no longer be competitive and import penetration will increase. Those within the glass industry have warned me—in turn I warn the Committee—that the real spin-off from the Chancellor's proposals will be higher unit costs for the industry. He will increase the number of unemployed builders and unemployment in the glass industry, which has had enough problems over the past few years.
The entire construction industry has suffered as a result of the Government's policies and the degree of penetration of continental glass producers, who just happen to enjoy energy subsidies, has increaed. In this instance I choose to put it as gently as that. In some instances, as in France and Germany, the energy subsidies are apparent. The Belgian industry receives a colossal number of subsidies. Of course, we never talk about that. We observe slavishly that Europe imposes VAT on glass, including double glazing, and we should follow suit.
It is said that it will be rather nice to raise an additional £400 million. This imposition of VAT will raise far less than that and the on-cost will be in the quality of work carried out and in the number who lose their jobs in the construction, glass, and distribution industries.
It is for all these reasons that I strongly support the amendments. I ask the Government to think again and not to restrict themselves to considering blandly how the extra money can be raised. I invite them to think in depth about the effects of the proposed alterations. I have no moral objection to giving every industrialist in Britain every possible incentive. I have no moral objection to giving builders and local authorities every possible incentive if at the end of the day we get better houses, better quality materials and British people back to work. If we can take from the dole queues some of those who were previously employed in the construction industry, the sacrifices will be worth making.
There are many other ways of raising £400 million— I am sure that my right hon. and hon. Friends could think of hundreds of them—and the area of capital gains tax, for example, could be such a source, but I shall not take that speculation any further. I support the amendment and I ask the Committee to support it.

Dr. Hampson: My hon. Friends the Members for High Peak (Mr. Hawkins) and for Croydon, South (Sir W. Clark) made a devastating case about the anomalies that will result from the timing stipulated in these proposals. My hon. Friend the Member for Rutland and Melton (Mr. Latham) reinforced strongly the case for a change because of the problems that will result for people committed to contracts. I shall deal briefly with three other aspects— two aspects of inner city policy and one general consideration of our improvement and rehabilitation policy.
It is easy to fall into the trap, as hon. Members have done, of talking about house extensions. My hon. Friend

the Member for Rutland and Melton pointed out that one can argue that sun lounges and the like should be eligible for VAT. My broad question about rehabilitation concerns an essential part of Government policy. Over the years, there have been difficulties with its policy of new build. Many measures in the Budget will help and encourage the construction industry and promote new build. Nevertheless, at the heart of the Government's housing programme is a policy of improvement. We have always spoken proudly about our record. Since the Conservative party came to office, it has increased almost fourfold the number of dwelling renovations and improvements. In 1982–83 alone the number increased from 104,000 to 230,000—a tremendous success story. It is true that we have now reduced the 90 per cent. grant level, which was at the heart of that promotion, to 75 per cent. Inevitably, we must expect a decrease in the number of improvements.
The Chancellor will now impose another 15 per cent. tax on people undertaking improvements. Inevitably, that measure will increase the severity of the decline in the number of home improvements and renovations. I do not know whether the construction industry as a whole can offset that loss. The 15 per cent. tax will make it impossible for people to afford the necessary scale of home improvement. Because they do not have the required money, they will either reduce the size of the improvement or, as my hon. Friend the Member for Rutland and Melton said, turn to cowboy and shoddy builders.
There is an answer to the problem, which I should like my hon. Friend the Minister of State to consider during the passage of the Bill. It would be easy to adjust the eligibility levels for improvement grant to take account of the extra 15 per cent. that people will be òbliged to pay. That change raises the question asked by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley): how much will be saved if we make compensatory payments? Inner city problems are not as easy to resolve as changing grant levels or the date which will apply to contracts.
I expect my hon. Friend the Minister of State to consider by Report certain aspects. My hon. Friend the Member for Rutland and Melton has tabled an interesting amendment. The hon. Member for Berwick-upon-Tweed (Mr. Beith) raised the matter broadly. However, it is not, by any stretch of the imagination, good enough to ask only for assistance for properties that are charities—I approve of this measure because a Conservative Government should not undermine or penalise the work of voluntary effort — churches, places of historic or architectural worth, disused or derelict barns or store houses. Why limit the proposals to those categories?
An acute problem is being created in inner cities because of this proposal. It is not good enough for the Treasury to take a broad brush and say, "We must extend the broad base of VAT." I approve of that policy in principle, but the Treasury should not undertake that measure regardless of the consequences for other central policies of the Government. It is not preferable to encourage builders to develop green fields and put new build on them while neglecting inner city derelict sites. I do not believe it is better to demolish than to rehabilitate. I believe that we shall see both those things.
Above all, a Conservative Government should not build disincentives into the transfer of assets from the public sector to the private sector. As we have argued in relation to privatisation and council house sales, we believe


passionately in the transfer of council property into private hands. This provision, however, will encourage the reverse.
Over recent years we have encouraged private builders, such as Wimpey and Barratt, to buy derelict inner city properties from councils and refurbish them. Myrtle gardens in Liverpool is a notable example, but I believe that Wimpey has about 5,000 units of a similar type. That policy is now called into question because the 15 per cent. will mean that it is more profitable to build on green field sites. If we are lucky, the properties will be refurbished by the councils themselves, but they will not be transferred to the private sector. Councils get relief from VAT, so if the council does the work itself, or if the builders carry out the work on property owned by the council, relief will apply. If the properties are purchased and transferred to the private sector, however, there will be no relief. What kind of encouragement and incentive for the private sector is that?
An equal amount of effort has been put into redirecting the housing associations to improve the inner cities. Conservatives wish to change the nature of inner city tenure and to bring diversification to their huge housing estates. As a result, 58 per cent. of housing association funds are now directed to inner city work. The additional VAT, however, will halve the amount of new work that they can undertake this year and the situation will become worse the following year. Again, one could compensate by increasing the cash limits for the housing associations, but there is a grotesque anomaly. What is the difference between the housing association and the local authority? Both are in the business of building and improving property. We have encouraged both to carry out work in the inner cities, but the local authority will get relief from VAT whereas a housing association operating with Government money and under Government guidelines will be penalised.
The anomalies thus created run contrary to the central inner city policies of the Government and to the philosophy that we all support.

Mr. Roy Hughes: The proposed imposition of VAT on home improvements will affect every area of the country, but it is causing particular anxiety in south Wales. There have been protests from building trade employers, who are normally ardent supporters of the Conservative Government, although it is difficult to understand why, in view of the deteriorating fortunes of the industry in recent years. There have also been protests from trade unions, local authorities and small builders as well as from individuals who presumably intended to improve their homes.
The danger of cowboy operators has been mentioned several times. Many people will no longer go to bona fide builders. All manner of dodges will become prevalent. The householder will get shoddy work and the Chancellor will obtain nothing like the income that he envisaged from the proposal. The black economy will flourish.
When one considers the deplorable housing position in Wales, one can understand the protests there. For instance, the chief officers for mid-Glamorgan recently published a report in which they pointed out that their area has the worst record in the whole of England and Wales for the percentage of homes lacking in basic amenities such as baths and indoor toilets.
Inadequate housing has a spin-off in health terms. Death rates in mid-Glamorgan are up to 60 per cent. higher than the national average. Death rates among babies in the Rhondda valley are 50 per cent. higher than the national average. Many more revealing statistics can be found in that report, and they all relate to inadequate housing. When people are dying from bad housing, the last thing they need is a hefty tax which will increase the cost of the work needed to improve their homes.
This proposal is a modern example of man's inhumanity to man. What is the Secretary of State for Wales saying about it? What guidance is he giving to the Cabinet? He should invite the Chancellor of the Exchequer to visit south Wales and see housing conditions there at first hand. The Chancellor might then have second thoughts about introducing this iniquitous tax. The last thing that housing needs at present is increased taxation.
Another recent report from the chief housing officers in Wales points out that much Welsh housing will be fit only for slum clearance by the year 2,000. If common sense prevailed in this terrible situation, one would expect that the construction industry would be encouraged, and that a major rescue operation would be mounted to try to arrest the decline. Instead, the industry is being faced with a terrible new tax.
The materials for the industry are largely home-produced. There is therefore no balance of payments problem. What is more, about 400,000 building workers are in the dole queue. This proposal will do nothing but make matters worse. It will not get rid of the bureaucratic illogicality of which the Chancellor has spoken; it will compound it. It will do a great deal of harm. There will be more bankruptcies in the industry, more unemployment, and an increased deterioration of our housing stock. I ask the Chancellor to think again.

Mr. Chapman: I am glad to have an opportunity to speak on this series of amendments, but it gives me no satisfaction to tell my hon. Friend the Minister of State that, for six reasons, I profoundly criticise the Government for the way in which they are introducing this impost.
If amendments Nos. 7 or 8 or some of the other amendments which will be considered later are pressed to a vote, I will find myself in support of them. I cannot support amendment No. 3 because I am not opposed to the principle of levying VAT in the construction industry or on building alterations, for reasons that I will explain.
I should declare an interest as a non-practising architect and the non-executive director of both a development company and a construction company.
My first objection to the way in which the Chancellor proposes to introduce VAT on building alterations is that I believe that it will be detrimental to urban regeneration. I am not thinking of just historic buildings or buildings in conservation areas. I should like to give two examples. We are finding that, unfortunately, because of the system building of the 1960s and before, many council blocks and estates are difficult to let. We have witnessed the establishment of a seed bed of private companies renovating such properties. I believe that this proposal will be detrimental to that development. Secondly, quite a few schemes for the conversion of dilapidated housing and other conversions such as old warehouses are going on. This VAT extension will encourage demolition rather than rehabilitation in some cases, but also discourage any development because the demolition costs of many


buildings are far too expensive. The cost of demolishing multi-storey blocks of council flats and Victorian warehouses can be quite significant.
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My second objection to the Chancellor's proposal is that it will inhibit conservation work. I shall say little about that as there is a later amendment concerning historic buildings, but it is no exaggeration to say that historic and listed buildings are, by definition, much more expensive to repair and maintain. I realise that statistics can conceal many variations, but it has been calculated that the cost might be as much as five times as high. Therefore, people who are trying to renovate historic and listed buildings already face the penalty of having to pay more than for renovating a more conventional building and will now have an additional 15 per cent. on the extra amount heaped on them. That cannot be fair.
My third objection is that the proposal will hit charities and, by definition, charities are least able to bear additional costs. I feel impelled to give a constituency example. My parish church of St. John the Baptist, Chipping Barnet, not unlike a church near my hon. Friend the Member for Croydon, South (Sir W. Clark), has just raised about £170,000. Work has just started and our rector now calculates that an additional £20,000-plus will have to be found. Perhaps I should declare a personal interest in that my wife is on the fund-raising committee. Two other churches—Christ Church, High Barnet, and St. Mary's, East Barnet, are laying plans to collect contributions to alter and improve the fabric and to maintain and repair their buildings. The hon. Member for Berwick-upon-Tweed (Mr. Beith) touched on the excellent work of the building preservation trusts, which will also be severely affected. It is worth noting that commercial participation has often been encouraged in such schemes and that will now be less likely.
One of my sternest criticisms of this measure is its retrospective element. That, by any account, must be unfair. If I thought that the Government were minded to say that any contracts entered into before or on Budget day would be exempt, or rather continue to be zero-rated for VAT, I imagine that right hon. and hon. Members on both sides of the House would be reassured. It is not just a question of whether the contract has been entered into. Often in the development process, land must be acquired first. At that point the commitment is made and the planning application must be submitted. The building process is lengthy—unlike the provision of take-away food. That has its effect on the building industry, which is still the greatest industry in the country, whether measured in terms of output or manpower.
Fifthly, one of the reasons why the Chancellor extended VAT to building alterations and extensions, instead of leaving it confined to repairs and maintenance, was to get rid of the confusion, evasion and anomalies. There was and is confusion, evasion and certainly plenty of anomalies, but he has merely pushed them further along the line. This measure will not diminish them. For example, if the proposal is passed, an argument can arise as to where the definition of alteration ends and where that of new building commences.
I tried to give a layman's summary of the difference between zero rating and exemption. A Customs and Excise announcement states:
Zero-rating will no longer apply to an existing building which has been reconstructed. All such sales will be exempt".
In many tax spheres "exemption" confers a benefit, but in VAT terms it is a downright penalty because, subject to certain relieving provisions, VAT on alteration expenditure is irrecoverable.
Other hon. Members mentioned the undoubted charter that this extension will give to cowboys, and talked about encouragement to the black economy. Much building is done in phases. Will phase 2, completed after phase 1, be an alteration and, therefore, subject to this new impost or will it be exempted?

Mr. Robin Maxwell-Hyslop: What about the case of listed buildings where the planning authority says that the facade must be retained and everything else demolished and built new? Will a half-inch gap be left between the structure and the facade so that VAT is not payable? That would be absurd, and it is a real problem.

Mr. Chapman: My hon. Friend raises a fair point, which was mentioned earlier. If one facade were retained, the building work behind it would be regarded as new and therefore continue to be zero rated. Whether the work on the facade itself would be zero rated, exempt or liable, remains to be seen. Two walls will constitute refurbishment or reconstruction and, therefore, carry exemption or the full 15 per cent. VAT. The scaffolding business will probably do well. Perhaps my hon. Friend should think of buying shares in it.
Finally, I object to the sudden and massive increase. It is paradoxical that when the Government have reduced inflation to 5 per cent. or below, they should impose 15 per cent. VAT. Ironically, 15 per cent. VAT will have a greater deterrent effect on development than it would during a period of a higher rate of inflation.
I understand the Chancellor's strategy and I am not opposed to the principle of marginally trying to shift taxation from direct taxes to taxes on spending. I will probably get much opprobrium from the construction industry for saying this, but I believe that we shall never get rid of the confusion, evasion and anomaly until either all building is zero rated or all building comes into the VAT net.

Mr. Rooker: That is for next year's Budget.

Mr. Chapman: The sixth EC directive on VAT means that uniform VAT on all new industrial and commercial buildings is on the horizon, so the hon. Gentleman might well be right. It would have been far better had the Chancellor come clean and said, "I am sorry, but it is our intention to impose VAT on all building work," which would at least get rid of the evasions, anomalies and confusion. He might have made what I call a reverse corporation tax announcement and said, "From this financial year all building work—repairs, maintenance, alterations, extensions and new work—will be rated at 3 per cent., which will increase to 6 per cent. next year and to 9 per cent. the year after," or at worst he could have said, "It will be 5 per cent. this year, 10 per cent. next year and the full 15 per cent. the year after"—[Interruption.] My only reason for not saying that is that next year I will probably be accused of saying, "You voted for the 15 per


cent. this year and you suggested its extension to all building work next year." I hope that my hon. Friend will take note of that remark.
I ask my hon. Friend the Minister to consider this matter carefully. Although I have proposed that VAT should be imposed throughout the building industry, there is certainly a strong case for excluding new housing, for obvious reasons.

Mr. Fisher: It is extremely regrettable that the Minister for Housing and Construction has not been present for this debate, which has turned into an important debate on housing. The excellent speeches from Opposition Members, especially from my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley), were almost matched by good and knowledgeable speeches from Conservative Members, especially from the hon. Members for Leeds, North-West (Dr. Hampson), for Chipping Barnet (Mr. Chapman) and for High Peak (Mr. Hawkins).
It is regrettable that the Minister is not here to listen to damning indictments of his policy and of the state of housing in Britain. It is also regrettable that the Chancellor did not discuss this measure with the Minister for Housing and Construction before he introduced it, which he manifestly has not. It is a sad example of no consultation, no planning and no knowledge of the housing industry. The damage which the Chancellor will cause, by this small change, in speeding the decline of the construction industry and of the quality of British housing will be considerable.
The hon. Member for Leeds, North-West mentioned refurbishment and large partnership deals in the inner cities. He was right to say that they should play an important part in any housing policy. He mentioned the size of the Myrtle gardens project. Another example is the Cantrell farm scheme in Sefton, where a 3,500-unit estate that has been vandalised is being partly demolished and rebuilt. That is an admirable example of the scale of operation. The scheme will cost millions of pounds, but if VAT is imposed, it will cost hundreds of thousands of pounds more. Another anomaly is that the contract for that scheme was signed in April 1983. It is a five-year project, yet the scheme, entered into for the benefit of the Sefton area by a private builder, a building society, a bank and the local authority—it was a complicated contract—will be put on a completely different basis with hundreds of thousands of pounds added to its cost.
If that is true of the unfairnesses and anomalies of the large inner partnership schemes, it is also true of small urban schemes. A city such as Stoke-on-Trent has considerable housing problems, with many old terraced houses and a high proportion of private ownership. Many of its properties lack basic amenities, and renovation plays a crucial part in its housing strategy.
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In Stoke-on-Trent, housing starts have dropped from 1,300 in 1978–79 to a mere 364 in 1983–84, but because of improvements in grant, renovations have gone up from 332 in 1980–81 to 776 last year. Indeed, there were twice as many applications. Therefore, renovations are crucial to the restoration of the housing stock in an old city such as Stoke-on-Trent.
Both the small companies and housing associations will be disastrously hit. This weekend I spoke to a small builder in Stoke-on-Trent. He has restored about 40 houses a year

over the last two years. Considering the small amount of new build—only 54 last year—by the local authority, 40 new units is a considerable and important addition to the housing stock. That man buys terraced houses at about £2,000 or £3,000 each, spends about £7,000 on them and sells them at about £11,500. Consequently his profit margin is about £1,500 on each dwelling. Such profit margins cannot be squeezed. His standards will either have to fall, resulting in the inevitable decay of the stock; his prices will have to rise, and the market will not bear that; or companies such as his will have to go bust or be driven underground, and we have heard enough already about the cowboys' charter.
There is also a danger that VAT will be lost twice. Small companies may be tempted to juggle their non-invoiced work, illegal though it is, with their registered and VAT-ed work, and VAT could well be lost on both sets of work, with a consequential decline in revenue to the Exchequer.
If anything, the situation with housing associations is even worse. I was glad to hear the hon. Member for Leeds, North-West mention housing associations, given his great expertise in that regard. The housing association allocation in Stoke-on-Trent has been cut by 20 per cent. for the forthcoming year to only £500,000, which will mean about 25 new units. The housing associations there see the imposition of VAT as an attack on the improvement for sale scheme—nothing more and nothing less.
The Minister may argue that those housing associations can increase prices, but by doing so they will put the price of those houses beyond the reach of the very people whom they are meant to help. That is simply not practical or possible, even if the market could bear it. Indeed, the local building societies and valuers are valuing the houses at about £10,500.
The average cost of refurbishing a typical terraced house is about £10,000. The imposition of VAT will mean an extra £1,500. Where will that come from? It cannot be passed on in the sale price. Therefore, the housing associations will next year have deficits of between £30,000 and £40,000 on their IFS scheme work and that will have to be found from their own funds.
The IFS scheme, which has played an enormously important part in restoring old stock, will be under threat. That will undoubtedly have a knock-on effect for the builders with whom those associations work. As a result of that threat to those skilled craftsmen and builders, skills generally will decline. There will be a real effect on inner city decay. People have talked about this as a cowboys' charter, but it is also a vandals' charter, because it will inevitably lead, if not to the demolition of established communities, to their dereliction.
In Stoke-on-Trent we are extremely lucky—it sounds rather ridiculous to say this—in that we have been undermined by the coal industry, because it means that we have had no high rise building and very little new build. We have had to make do with the existing land use and buildings. That makes for cohesive communities and the quality of life remains, with strong local communities and an attractive form of Victorian architecture with much atmosphere and style. It gives the Potteries, if not a beautiful appearance, an individual one to which people can relate.
If this scheme goes through, it will mean that the work of restoring terraces will grind to a standstill. That will lead to decay, dereliction, council closing orders, and


eventually, if not immediately, demolition by degrees. I hope that the Government did not realise the damage that they were suggesting by this measure. I hope that the Minister will listen to the expertise shown on the Government Benches—I am sure that he will discount it coming from the Labour Benches—by hon. Members with experience in the housing industry. I hope that he will see the damage that this scheme will do to the small builder, to small schemes, to the householder, to large inner city schemes and the whole housing industry.
The hon. Member for Chipping Barnet referred to the sixth directive of the EEC, but that directive gives the country the right to zero rate goods
for the benefit of the final consumer.
Surely housing comes into that category and therefore there is no need to harmonise this industry with the sixth directive.
As my right hon. Friend the Member for Sparkbrook said, the danger is that this will be the beginning of a general attack on the housing industry and will lead to a general imposition of VAT on new build. That would be disastrous. This measure is disastrous enough. I urge the Minister, when he sums up, to pay attention to the expertise shown by his hon. Friends and to recognise the damage that can be done by this imposition on the housing industry.

Sir Geoffrey Finsberg: It is 25 years since I first started paying regular visits to the city of Stoke-on-Trent. I recognise the point made by the hon. Member for Stoke-on-Trent, Central (Mr. Fisher). The beauty of some of the old bottle ovens has to be seen to be believed. I can understand the depth of feeling that he expressed in his excellent speech.
I did not fall for the treacle that was spread by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) when he was trying to persuade us that there should be no VAT on building projects. However, I feel that it is monstrous, un-Conservative and Socialistic to try to bring in retrospective dates for VAT. If someone, in good faith, has entered into a contract for a building project, it is wrong that he should find that at any stage the Government can step in and change the circumstances.
I am sure that my hon. Friend the Minister has been told by his officials that it would be complicated to try to make exceptions. I remind him that it was not found terribly complicated to fix a firm date for life assurance policies so that any policy taken out before 13 March would retain its tax benefit, whether that policy was for one year or 50 years. A building contract entered into by a private individual, a housing association or a charity is in exactly the same position. The contract is entered into in good faith and it is wrong that the Treasury should try at a late stage to upset the calculations.
In his excellent speech, my hon. Friend the Member for Croydon, South (Sir W. Clark) said that he would be happy if the Chancellor were to examine cases on their merits. That is not good enough. Either there is a binding contract entered into in good faith, or there is not. If there is, it ought to be honoured.
I shall listen carefully to what my hon. Friend the Minister of State, Treasury says in reply. I am not prepared to listen to honeyed words which mean nothing. However, if he says that a lot has been said today which requires

further thought and that he is prepared to re-examine the matter before Report, if he is prepared to go that far, he will find that he will carry me with him. Whether he carries me with him may not worry him, but there is a strong matter of principle here. It is a principle on which I thought he and I were brought up when we entered the Conservative party more years ago than he or I or our respective wives would care to acknowledge—sanctity of contract. That is what is at stake in the Finance (No. 2) Bill today.
I promised myself, if not the Committee, that I would be brief. I hope that I have kept that promise. I look forward with interest to what my hon. Friend says when he replies to the debate.

Mr. Bell: I am grateful for the opportunity to follow the hon. Member for Hampstead and Highgate (Sir G. Finsberg) and to commend to the House his views on the sanctity of contract. He has highlighted an important point which I trust and hope the Minister of State, Treasury, will bear in mind when he comes to reply.
I want to draw attention to remarks made by the Chancellor of the Exchequer on 13 March 1984. At column 303 of Hansard he described the measures relating to the building industry as unwelcome. That was a significant statement for the Chancellor to make, because it meant that he knew what he was doing. He was not simply slipping this in in complete ignorance. He knew perfectly well that his remarks and the tax would be most unwelcome to the construction industry. He was right to say that and to anticipate the industry's reaction.
Under Conservative Governments since 1979, about 225,000 construction workers have ceased to be employed. My right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) referred to the fact that while construction companies have been good friends to the Conservative party, the Conservative party in government has not been a good friend to the construction industry. The latest VAT measures will have serious effects on the industry.
The Chancellor had his mind on money. He saw easy pickings. He saw that he could get £225 million this year and about £450 million next year. That was the criterion on which he was working. He was reflecting, not on the damage that he was likely to do to the construction industry, but only on the money that he could raise to balance his books. He might have taken into account the variety of people and concerns which will be affected by the tax and which have been mentioned tonight. We have heard about alterations to listed buildings and to churches. We have heard about local authorities, housing associations, voluntary groups in the form of charities, and thousands of home owners who will now be penalised as a result of the extension of VAT.
As we have heard—an amendment has been tabled to deal with this—there is an element of retrospection in this tax. That must be somewhat abhorrent, and I trust that the amendment will be moved and voted upon.
We have also heard how the proposals will affect the small builder, and here the entrepreneurial spirit which the Conservative Government say they seek to assist comes in. The small builder is likely to be the first to be hit. He is generally self-employed, he employs few people, yet he has made a considerable contribution to the improvement of housing in the country.
It being Ten o'clock, the Chairman left the Chair to report progress and ask leave to sit again.

BUSINESS OF THE HOUSE

Ordered,

That, at this day's sitting, the motion relating to Ways and Means may be proceeded with, though opposed, until any hour.—[Mr. Sainsbury.]

Finance (No. 2) Bill

Clause 10

ZERO RATING

Question again proposed, That the amendment be made.

Mr. Bell: I had referred to the small builder and to the entrepreneurial spirit which the Conservative Government say they wish to inculcate, yet they are imposing 15 per cent. VAT on the alteration of buildings. We have heard a great deal in the debates, and no doubt shall hear more from the Minister of State, about how the Labour Government did little for the small business, as against what the Conservative Government have done. I refer to the work of the former Financial Secretary to the Treasury, Lord Lever, who, in my submission, did more for small businesses than this Government have ever done. The facts are there for all to see. The greatest number of bankruptcies ever to have occurred in the country in a single year took place last year. The small builder must groan when he sees what is likely to happen when he has to pay VAT at 15 per cent. on alterations.
We have also heard a great deal about the cowboy element in small firms. We believe that this new imposition of VAT will open the floodgates to the cowboys and to tax-dodging firms. We have observed how the Chancellor of the Exchequer has drawn into the net of this taxation work to be done under the Chronically Sick and Disabled Persons Act 1970. Moves will no doubt be made to have work under that Act suitably exempted.
Information has come from the Manufacturers Association of Radiators and Convectors that the new tax will put about £200 on to the cost of installing central heating. This sector has already been badly hit by imports, and it will be badly hit by this new imposition of VAT. It can only reduce further the demand for these products. Who will suffer from this? The small business that does the installation will suffer. The person who wishes to have central heating installed will find that the cost has increased, and a doubt will enter that person's mind whether to go ahead with the work.
Energy conservation and the effect of double glazing have been referred to in the debate. One hon. Member said that double glazing was not essential, but this depends on where one lives, and the reason for double glazing. Double glazing must be an essential for those who wish to cut their heating bills and to reduce their household expenses. That, too, will be hit by the measures.
One wonders whether the proposals, when first mooted by the Treasury, were properly understood by the Chancellor and by the Minister. The Minister of State will no doubt be able to advise the Committee whether he will take on board the various points made to him in the debate

and whether he will relent on the concept of taxation and on the more selective and limited amendments on the Amendment Paper.
There can be no doubt of the effect that the proposals have had on the Building Employers Confederation, whose president, Mr. Bruce Chivers, described this extra imposition of VAT as a
deplorable and . . . savage blow to the industry.
He said that the move would
jeopardise the jobs of thousands of building workers in an industry where unemployment is already at record levels
and that it would "penalise bona fide firms" and fuel the black economy by giving the advantage to "tax-dodging cowboys".
According to Mr. Shaun Leslie, an economist:
The Chancellor is relentlessly nibbling away at the construction industry".
Similar views have been expressed by the National Home Improvement Council, by the Federation of Master Builders and by the chairman of the Historic Buildings and Monuments Commission for England. Reference has already been made to Lord Montagu of Beaulieu, the chairman of that commission, who in a letter to The Times of 6 April 1984, said:
The VAT change would also threaten the operation of the building preservation trusts which, in the last ten years, have come to play a crucial role in saving historic buildings. Most of those trusts operate on very small margins and would not be able to obtain an extra 15 per cent. on the sale of properties they have restored. Already several important projects, including that for the Thermal Baths, Buxton, have been halted following the VAT announcement.
Therefore, the Government's proposals go far wider than they imagined.
Work done under the Chronically Sick and Disabled Persons Act will also be caught by this provision. Indeed, I have a letter from a member of the public who wrote to me saying that it was a serious matter for her to have to pay this tax given that she had been waiting eight years to have work done on her house and that she was the parent of a handicapped child.
Therefore, the extension of VAT has serious consequences and we do not agree that it should apply to building alterations. I believe that the tax will be extended next year and the year after that, and that it will continue to be extended because, as the manufacturing sector continues to shrink, unemployment still has to be paid for, and as the Government seek to bring about income tax reductions, they can hope to balance the books only through VAT, North sea oil revenue and the sale of public sector assets. Those who oppose the extension of VAT but who have reluctantly decided to vote for it will he very sorry next year when it is extended still further and, indeed, is extended throughout the lifetime of this Parliament.

Mr. Richard Page: I should like to start my speech by having the temerity to suggest that those in the building industry may have helped to bring this tax upon themselves. The whole House knows the rather broad and blurred line between repairs and alterations and in more cases than not, at the end of the day, the benefit has not accrued to the Revenue. That has not helped the industry's case.
I am slightly disappointed that there has been no reference today to the fact that this Budget is a package and is not just one sided. There are other sides to it. There is the removal of the national income surcharge and the


reduction of corporation tax, all of which will help the building industry and, in particular, the small business sector. However, the introduction of any tax is a delicate operation. I appreciate the extension of the date to 1 June to give people a chance to complete work contracted before that date. However, I have found that in some cases the time allowed has regrettably not been enough. There is, therefore, some form of retrospection, as other hon. Members have mentioned.
I do not intend to stray into the debate on amendment No. 21 tabled by my hon. Friend the Member for Rutland and Melton (Mr. Latham). It has been well trampled already. I do not wish to discuss proposals to give relief for properties built for the disabled. I have examples of both in my constituency. Major building operations are in progress which will not be finished by 1 June. In one case building works are costing in excess of £350,000. Although the builders are working flat out the work will not be finished by 1 June and the estimate is that about £30,000 extra will have to be raised. That will cause extreme difficulty and hardship.
My hon. Friend the Member for Leeds, North-West (Dr. Hampson) talked about renovation. People buying houses to convert into flats will be severely disadvantaged by the measure. Those in the middle of conversions will have to pay 15 per cent. more. The profit on such properties is not as high as 15 per cent. I hope that some consideration will be given to the plight of people making such conversions.
If exemptions are made my arguments will be unnecessary. If they are not, I ask my hon. Friend, not to accept the amendments, but to take the advice of my hon. Friend the Member for Croydon, South (Sir W. Clark) and to consider tonight's arguments and see whether he can remove the retrospective tax element and bring forward fresh ideas on Report.

Mr. Kevin Barron: Most comments have been about the imposition of VAT on building regulations. A few years ago most Government Members were waving the flag for the home-owners in our society. They encouraged the sale of public housing—some of which we now find to be substandard—which relied on Government grant. Not only have those grants been cut, but 15 per cent. extra is being imposed upon the renovation of such houses. I hope that the debate will be remembered because it lets down the people who want to improve houses which they have bought from public bodies.
I want to concentrate this evening not on the question of home improvement grants, but on the 15 per cent. VAT imposition upon energy conservation in the household. I refer in particular to central heating, double glazing and draught proofing on which a 15 per cent. VAT will be imposed from 1 June.
Central heating has never been subject to tax in Britain. It was not subject to purchase tax before VAT was introduced. There was good reason for that. Central heating is the most efficient form of domestic heating. Not only does it provide the warmth needed in a country such as Britain, but it can save Governments many millions of pounds once installed.
10.15 pm
In 1982–83 the Exchequer paid £1,417 million towards the cost of heating bills in about 2·5 million households

that depended upon such benefits for heating. During that year, Government expenditure on home insulation was about £18 million. Although Government expenditure on insulation increased last year to about £40 million, there is still a shortfall in the cost to the Exchequer of keeping homes warm that suffer from fuel poverty. It is ludicrous, therefore, to put 15 per cent. VAT on the cost of forms of fighting fuel poverty.
It was estimated 18 months ago that 5 million homes had no insulation and approximately a further 4 million had inadequate insulation. To put 15 per cent. VAT on insulation begs the question as to what the Government expect will happen in those homes.
There is an increase in the so-called disease of fuel poverty while at the same time we are energy rich in fossil and many other fuels. By putting on 15 per cent. VAT the Government are lacking in common sense. They are bothered only about short-term gains to the Treasury and not the high levels of fuel poverty. Those short-term gains are to finance the Government's friends in business and have nothing to do with getting rid of fuel poverty. I do not mean the hundreds of small businesses that will be put under tremendous pressure and which will perhaps add to the 3 million in the dole queues.
On 13 March, to great cheers from the Conservative Benches, the Chancellor of the Exchequer said that he was going to abolish the national insurance surcharge. These VAT increases will make fuel poverty worse. It is a terrible indictment of the way in which the Government are tackling the problems of the poverty stricken. My right hon. Friend the Member for Halton (Mr. Oakes) said that it is well known that domestic energy usage has declined since 1979 directly in proportion to the increase in central heating systems. Therefore, why should we be considering putting 15 per cent. VAT on central heating systems?
This callous, or, perhaps it could be said, cold act, by the Government works against stopping fuel poverty. There is supposed to be a co-ordinated strategy among the Secretaries of State for Energy, Environment and Health and Social Services for dealing with fuel poverty and the millions of homes that suffer greatly from a lack of energy in an energy surplus economy? Will the Minister reconsider this proposal for VAT on aids to stop fuel poverty before Report?

Sir Hugh Rossi: Some months ago I tabled a parliamentary question asking whether it was true that if one installed a washing machine and connected it to the existing plumbing one had to pay VAT, but that if one knocked a hole in an outside wall and put the waste pipe through that, one was exempt from VAT because an alteration had taken place to the structure of the house. The answer to both propositions was yes. I thought it absurd that we had to exist with distinctions of that kind—that 15 per cent. on the price of doing the work depended on whether one took a couple of bricks out of a wall. I had hoped that consideration of such matters would have led to the exemption of all building work from VAT. Instead, the Government have decided to take the other course.
I appreciate that the Government face pressures. I understand, for example, that there have been pressures from the European Community to bring all construction work, whether it be original work or alterations and


adaptations, within the VAT net. The course that is being taken may be a compromise in relation to the position that the Government might otherwise have to take.
Having said that, and regretting it greatly—because I feel, in common with hon. Members on both sides of the Committee, that this will be a difficulty for the construction industry at a low ebb in its fortunes—I hope that the Chancellor will make exemptions, for they would not drive a coach and horses through what the Government are trying to do. That view arises from constituency cases that have been put to me.
In one case, a constituent wished to demolish property and rebuild something entirely new. That operation would have been free of VAT. The local planning authority, because of a conservation area requirement, insisted that the existing facade be maintained and that everything be rebuilt round that. Under the intended legislation, that would mean that alterations would take place and therefore VAT would be attracted, against the desire of the developer because he would prefer, were it not for the insistence of the local authority, to have an entirely new building, in which case he would not have to pay VAT. Perhaps the Government will consider that situation. I do not believe that a variation of that kind would cause such difficulties as to make the Government's intention inoperable.
I do not wish to anticipate arguments that will be deployed on later amendments, which will concern other cases that have been put to me. Will the traditional exemption against the imposition of the new tax be given to charities? Many charities, housing associations and organisations looking after the disabled, in which I have an interest, carry out conversion work. They will now be obliged to pay VAT unless exemption is made in their favour. For historic buildings, where people must maintain for the public benefit buildings which are part of the natinal heritage, I hope that the Government will also make an exemption.

Mr. Austin Mitchell: There is much unemployment in the building industry. That industry could be used to stimulate the economy in ways that would improve the housing stock, the living conditions of our people and the social environment in which they live. All those factors show that there is a need to stimulate the industry further by removing VAT altogether. Instead, the Chancellor has opted for what he describes as a "tidying up" operation, which will depress building activity and stop or at least hold back, attempts to improve the environment.
It is worth while asking why the Chancellor is taking a course that seems so unnecessary at a time when a further stimulus to the building industry would be one way of keeping going that faltering impetus which he calls the British economic revival, and alleviating massive unemployment — it must be about 350,000 — in the building industry.
The answer to the question, "Why now?", seems to lie in the distinction between alterations and repairs. In other words, the pattern of legal decisions has not been in the Treasury's favour. That is described in a letter to the Grimsby District Builders Association by the Customs and Excise Administrative Directorate as follows:
the existing dividing line between repairs and alterations was becoming increasingly unworkable in practice.
In other words, "We did not like the verdicts in the cases that went before the courts and the pattern of decision

making that was emerging, so we are seizing the opportunity to bring that pattern to an end." That must be the only motive for the change. It does not come from pressure from the EC, because in this instance the Government have discretion to decide whether they will conform with the other member states. They can decide whether to tidy up the VAT anomalies or maintain them for the benefit of the consumer.
It is curious that the Government, who vociferously say that they will not agree to any increase in own resources, are at the same time busily paving the way for such an increase by tidying up the VAT anomalies. They do not have to succumb to any pressure to do so. It is not necessary to tidy up VAT anomalies. By ending one anomaly, the Government are creating others. The easiest way to bring an end to the anomalies would be to end the imposition of VAT on repairs. The dividing line could be clarified in that simple and straightforward fashion.
Social justice is not a factor. What sort of social justice is it to favour someone who has the ability to raise a mortgage or cash on a sufficient scale to have a garage built on to his house during the original building—in those circumstances he will not pay VAT on the construction of the garage—and not to favour someone else who has to have his garage added later because he cannot afford to have the garage constructed initially? If the Government's proposals are put into effect, the person who has a garage added to his house subsequent to the initial building will pay VAT on the improvement.
The Government wish to line up the law because judgments have been going against them. It is worth emphasising that they are striking yet another blow against small businesses. Builders estimate that the work load for the industry will be reduced by about £450 million and that that will lead to the loss of 34,000 jobs. I hope that the Minister will tell us whether he agrees with those estimates. Has the Treasury studied the possible loss of jobs that will accrue from this measure? If they propose to tax spending on improvements, because they argue that it is discretionary, the imposition of 15 per cent. VAT on that spending will mean that there will be less of it. There will therefore be less work. I hope that we shall be told the Treasury's estimates of the decline in activity and the loss of jobs that will accrue.

Mr. Bermingham: Does my hon. Friend agree that we must add to his figures the loss of jobs in the supply industries which handle the raw materials that the building industry requires? There are many examples, such as brick-making, joinery, glazing, metal work and foundry work. All these processes involve the basic commodities that builders use.

Mr. Mitchell: I am grateful to my hon. Friend for mentioning the losses in the supply and ancillary industries. The estimate is based on the loss of jobs in the building industry. Does the Minister accept the figure of 34,000? What is the additional figure for the trades and industries that supply the building industry? What is the estimated increased activity in the so-called black economy which, inevitably, will operate because of the imposition of the 15 per cent.? Work will be done off the barrow. Incentives are already implicit in the industry's structure. The small builder, who is now squeezed by the big boys higher up in the hierarchy, will be squeezed by


the barrow jobs lower down the hierarchy. Life will be increasingly difficult for the small builder, who has had to bear many of the sacrifices of the depression that the Government, with their policies of high interest rates and monetarism, have produced.
This measure is a severe blow to home ownership, which the Government tell us they are dedicated to encouraging. A central part of home ownership—the wish to own one's home—is the desire to make the home better by adding double glazing, central heating and other available improvements. That desire will be penalised by the imposition of the 15 per cent. tax. At times, it appears that the spirit of initiative and enterprise has gone into the improvement of housing stock rather than the development of manufacturing industry. An enormous amount of ingenuity, effort and initiative has been lavished on homes in a desire to make improvements. It is wrong to penalise people in this fashion.
Presumably, the Government base their decisions on realistic estimates of the economic effects of their policies. What is the Government's estimate of the impact on home improvement that will occur as a result of these measures?
One point that has not been mentioned in the debate is the effect of the measures on village halls—not just in rural areas but in the suburbs and other housing areas of towns such as Grimsby. In 1981, the Government, as part of their policy of cutting central Government expenditure and forcing burdens on local government, withdrew the idea of making capital grants for community building projects, and the burden was thrown on local authorities. Local authorities responded differently — some generously, others with stinginess.
Because the onus has been placed on local authorities, the village halls which received grants are faced with an unpredictable—the Chancellor's decisions are unpredictable because of the nature of his job and his intellectual approach to these matters—increase in costs which the local authorities will have great difficulty in avoiding. They will not have budgeted for those increases. In many cases, the effect will be so crippling that work will be held up.
Many of those halls were built in the early part of this century. Many of them are former Army huts and similar premises. They need drastic improvements and rebuilding. It will be expensive to make improvements. Local authorities, without sufficient money, will be unable to add the extra 15 per cent. necessary to carry out the work. That work is important to small local communities. It provides a focus in many of the surburbs in the towns. What compensation will there be for the funds now provided for the improvement cf village halls in that way?
I cannot emphasise too strongly that a healthy, expanding building industry is a major dynamic of our economy which should be unleashed and encouraged, not penalised with 15 per cent. VAT. It will be most disappointing if Conservative Members, who have the power to stop this proposal and most of whom have spoken against it, are meek and supine enough to accept it, or at least not to vote against it. The power to stop this iniquitous proposal, which harms builders and damages the objectives that the Government themselves proclaim, lies in the hands of Conservative Members today.

Mr. Campbell-Savours: I rise for the second time to speak on the Finance Bill today. On the first occasion, I was able to speak at some length on the issue involved. I should have liked to join my hon. Friends in doing the same on this occasion, but I can speak for only a minute. The reason is simple. I am one of those affected retrospectively by the legislation, which I deplore. This derives from the fact that I am improving a home. The result is that I can neither vote in the Division—I could do so, but it would be wrong—nor speak at length. The Government are to be condemned for having placed Members of Parliament in the invidious position of being unable to speak in the debate because to do so would offend what they believe to be the correct way to pursue their public duties as Members of Parliament.

The Minister of State, Treasury (Mr. Barney Hayhoe): In moving amendment No. 3, the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was extremely frank about his motives and intentions. He made it perfectly clear that he sought to negate the Chancellor's entire plan to broaden the VAT base by including building alterations. In other words, the right hon. Gentleman was concerned to wreck this part of my right hon. Friend's strategy.
I shall deal first with amendments Nos. 3 and 20, which have the effect that I have described and would cost about £250 million this year and £450 million in a full year. Next I shall deal with amendments Nos. 4, 5 and 6, which would postpone the effective date from 1 June until later in the year. I shall then go on to amendments Nos. 7 and 8, which I believe are designed to exclude pre-budget contracts.
As I have said, the extension of the VAT base in this way is an essential element in my right hon. Friend's Budget strategy of switching from taxes on earnings to taxes on spending. He thus had the choice of increasing the standard rate of VAT or seeking to extend its base. The building alterations area was a fairly obvious candidate, first because repairs and maintenance are already taxed and, secondly, as I believe has been acknowledged in the debate, because alterations, extensions and improvements are far more discretionary in nature, involving far more of a choice as to whether the work should be carried out, than the decision to carry out repairs and maintenance work which is by definition essential.
Thirdly, the yield of such an extension of the VAT base was very substantial. The existing borderline between repairs and alterations is extremely complicated. No one who has spoken in the debate has denied that. There may well be argument about whether the new borderline is less complicated. Indeed, the right hon. Member for Sparkbrook was at pains to show that the new borderline would have just as many anomalies associated with it as the present borderline between repairs and maintenance on the one side and alterations, extensions and improvements on the other.
I believe that the borderline will be less complicated. I have dealt with these matters for some months, and there is little doubt in my mind that the changes will produce a less complicated borderline. I would not argue that all the anomalies will be eliminated. The ghost of Gerald Nabarro will find plenty of ground to walk on in any area of VAT. Many curious anomalies are bound to be thrown up wherever the borderline is drawn, and I have no doubt that they will be brought to our attention.
I should like to deal with some of the major arguments that have been deployed. First, there is the argument about the general state of the building industry. The right hon. Gentleman spoke in gloomy and pessimistic terms about prospects for the building and construction industry. He painted far too black a picture. We recognise that the construction industry has suffered badly in the recession, but the figures for 1983 show that a recovery is under way, and the latest forecast from the Economic Development Committee for 1984 looks pretty good. There is an added incentive to bring forward construction work to qualify for the capital allowances while they last. For the commercial sector, with no industrial building allowances to lose, the progressive reduction to 35 per cent. of the rate of corporation tax should bring much new business to the construction industry. The reduction of the rate of corporation tax to 35 per cent. should be good for the labour-intensive construction industry. The same goes for the abolition of the national insurance surcharge. The cut in stamp duty will be good for house building, and the post-Budget reduction in building society mortgage interest rates will also help.
This measure must be seen in the context of the overall prospects for the industry flowing from the Budget as a whole. One must also remember that for over three-quarters of the construction industry's output, either it will be zero-rated or the VAT will be deductible by the purchaser and therefore not a real charge at all.
The advice of my hon. Friend the Member for Hertfordshire, South-West (Mr. Page) was sound. One can judge the measures only by considering the Budget as a whole. The view of the Government is that the overall effect of the VAT measures will not be damaging to jobs in the industry.

Mr. Bermingham: Would not the Minister concede that if by means of capital allowance grants one induces people to bring forward their construction programmes, and if by means of the imposition of VAT one induces people to bring forward the completion of their projects, in six to nine months' time there will be a lull in the building industry because projects will have been brought forward and new projects will not be on stream? There will be a gap.
If I pull a piece of molten metal towards me, I will amass it in front of me but I will create a gap further back.

Mr. Hayhoe: There may be some element of truth in what the hon. Gentleman says, but his timescales are wrong. Especially in firms involved in industrial building, the timescales for decisions are very much longer than the hon. Gentleman has suggested.
The black economy and cowboys is another major issue that hon. Members on both sides of the Committee have raised. I know that the building industry is anxious that the changes might encourage householders to employ so-called cowboys or moonlighters rather than legitimate building contractors. I entirely accept the clear call of my hon. Friend the Member for Rutland and Melton (Mr. Latham) for urgent action to deal with them.

Mr. Rooker: The Minister said that the black economy was OK at a recent Question time.

Mr. Hayhoe: The hon. Gentleman must quote me correctly. He is normally punctilious, but he should go

away and study the report as he will find that I did not say what he said that I said. I normally expect more fairness from him.
10.45 pm
Most of the jobs that will now be taxed are done by reputable firms. Such jobs tend to involve greater expenditure on equipment and materials than repair and maintenance, which is the area in which cowboys and moonlighters have had greater scope for activity. There is, therefore, less incentive to have alterations done by a person who is not registered for VAT and therefore cannot reclaim it for materials. While the increased tax burden will mean that there is a greater incentive for fraud by the VAT-registered trader or traders who ought to be registered for VAT, the greater clarity and simplicity of the structure will make Customs' job in combating evasion easier. There is no complacency about the need to limit VAT evasion and fraud in the construction industry and elsewhere and, even before the Budget, the Board of Customs and Excise had decided to strengthen the control effort in local VAT offices. Those plans are now being implemented.
With regard to special cases for home extensions, I am glad that some hon. Members have recognised that such activity represents the type of discretionary expenditure which the change was designed to bring into tax. It would defeat the simplification aspect of the change if we attempted to relieve some extensions for which a change might be argued on social policy grounds — as, for example, for granny flats — while taxing others. It should not be forgotten that essential repairs and maintenance are already taxed. Much of the debate seemed to be based on an assumption that no VAT was charged on building work whereas those who know the situation recognise that VAT has been charged on repairs and this proposal extends that to alterations.
Several hon. Members referred to energy saving and central heating. Amendment No. 24 deals with that matter so I shall save my remarks until we discuss it. My hon. Friend the Member for Leeds., North-West (Dr. Hampson) referred to the problem of rehabilitation, renovation and refurbishment. For such work, which is largely funded by grant, to be relieved from VAT would mean the Government assisting one activity by a different route. The old VAT structure which taxed repairs and sensitive restorations of older properties while relieving alterations was not designed to and did not promote rehabilitation. To the extent that it is public policy to assist renovation, I join my hon. Friend in believing that it is more economic and efficient to use grants that are tailored to the project in question, subject to the reservation that I must make—the over-riding proviso of what the Government can afford. My hon. Friend also referred to the refurbishment of local authority housing. As he said, local authorities can recover all of the VAT that they incur.
So long as the builders carrying out the work do not take legal title to the houses or flats, they will be providing building or selling agency services to the local authority and the tax charge will be recoverable by the authority under the normal arrangements.

Dr. Hampson: I regret to have to say that that is not good enough, because it misses my central point. As a Government, we are in the business of encouraging private developers to take over derelict properties from local


authorities. We are not in the business of allowing local authorities to do them up and retain ownership of them if they could easily pass them to the private sector.

Mr. Hayhoe: I accept that there is that problem. There is no doubt that the extension of VAT to building alterations throws up several difficult problems, as the debate has demonstrated, one of which concerns housing associations. However, the amendments will not tackle those problems, nor can they be wholly tackled by changing the form of the tax and giving specific relief. I repeat that the best and most economic way of tackling many of those problems is through grants. However, that must take into account—with my right hon. and learned Friend the Chief Secretary sitting beside me, how can I say otherwise — the overriding proviso to keep public expenditure within limits that the nation can afford.
Amendments Nos. 4, 5 and 6 seek to delay the date on which the tax becomes effective from 1 June to 1 September, 1 October or 1 January 1985. The cost of the amendment proposed by my hon. Friend the Member for Rutland and Melton would be about £100 million. A postponement to 1 October would cost about £140 million, and a postponement to 1 January would cost more than £200 million. Substantial sums are involved, and the arbitrariness of the date chosen would still lead to criticism from those who fell on the wrong side of the new line that we had drawn. It would also be unfair to those who have already adjusted their plans as a result of the announced changes. They would not be helped by the deferment, and might think that they have been made to suffer for having take prudent action, especially since others who are only now planning work for July and August would get an unexpected bonus.

Dr. Glyn: Does my hon. Friend agree that it is reasonable that those who have started work already should have a reasonable period in which to complete it and not be forced to complete it before the change is made?

Mr. Hayhoe: I shall return to my hon. Friend's point in a moment, which relates to contracts entered into before the Budget, where the work is continuing but will not be completed before 1 June.
Several of my hon. Friends made powerful speeches about the problem of listed buildings—

Mr. Hattersley: The Minister said that, if the operative date were postponed, a number of people would suffer. Who would those people be, and how would they suffer?

Mr. Hayhoe: The point that I was seeking to make was that, although many people will fall on the wrong side of 1 June because their work will not be completed by then, the creation of a new date line of 1 September, 1 October or 1 January would produce a new set of people who felt sore about being on the wrong side of those lines. If the cost of allowing such a postponement is between £100 million and £200 million, it is perfectly clear that a significant number of people will be extremely pleased by such postponement.

Mr. Hattersley: I assure the Minister that he said that a number of people who had already made prudent adjustments to their arrangements would suffer if there

were a following postponement. I am perfectly prepared to agree that that was a mistake, but if it was not, what did he mean?

Mr. Hayhoe: I was saying that people who have already made prudent arrangments in respect of future work, on the basis of what has been announced in the Budget, will now feel disadvantaged by the fact that had they not taken such prudent action they would have gained. The right hon. Gentleman should reflect on this. Given his ministerial experience he will know that as soon as one begins to play around with dividing lines of this sort, and as one satisfies one group of people who feel that they have gained, another group will feel themselves to be particularly disadvantaged.

Sir William Clark: I am intrigued with this argument, but I cannot understand what prudent arrangements anyone could take. The only one which a builder could take is to complete the job before 1 June. If that builder or developer has taken that action, I cannot see how extending the date from 1 June to 1 September or whenever will affect him.

Mr. Hayhoe: My hon. Friend may be confused by thinking of people who have contractual arrangements. I am talking not about those but about people who were perhaps considering entering into contractual arrangements and on the basis of the 1 June date decided not to proceed or even changed their arrangements. If they now found that the date will be 1 January, they would say, "If only I had know that, I could have done something"—[Laughter.] I appreciate that at 10.55 pm it is sometimes difficult for these slightly more complicated concepts to be fully taken on board.
I come back to my point about listed buildings. Many hon. Members referred to particular problems with regard to alterations to such buildings. Indeed, my hon. Friend the Member for Rutland and Melton took the hon. Member for Berwick-upon-Tweed (Mr. Beith) to task for seeking to move amendment No. 21. If we reach that amendment later this evening, I hope to be able to say something about the Government's attitude toward structural alterations to listed buildings which will go some way to meeting many of the points that have been made in this debate.
A number of my hon. Friends asked about contracts that had been struck before Budget day. The cost of a concession to exclude pre-Budget day contracts from the VAT changes would be considerable. The first-year revenue lost, if there were to be a blanket exclusion, would almost certainly have to be made up in some other way.
As my hon. Friend the Member for Chipping Barnet (Mr. Chapman) made perfectly clear, such a concession would not help people who before Budget day spent time and money planning work and perhaps entered into other commitments on the basis of the work that they would be contracting for at a later date. As he said, merely to have a relief that dealt with contracts entered into before Budget day would still leave people feeling very aggrieved.
On the grounds of cost, and the more general grounds associated with the whole approach of VAT as tax, I am bound to resist the amendments. I shall, however, respond to what my hon. Friends the Members for Croydon, South (Sir W. Clark) and for Hampstead and Highgate (Sir G. Finsberg) have said. They have asked that Treasury Ministers should consider what they have said in the debate today about retrospection and their suggestions about how this could be tackled. I gladly give that


undertaking. My right hon. Friends and other members of the Treasury team will consider what has been said. However, I want to make it clear that—as I am sure that they will understand—in saying that, I am giving no undertaking nor making any commitment as to the action that will follow on these reliefs. One shall give careful consideration to what my hon. Friends have said.

11 pm

Sir William Clark: I am sure that my hon. Friend will agree that my hon. Friends on the Back Benches will look with great interest to Report, to see what consideration is brought forward. If we are going on the criterion of cost, because if contracts entered into before 13 March are excluded from the increase of 15 per cent. that will cost the Exchequer money, what is the logic of deferring the composite rate for banks, which if it came in on 13 March would give a higher revenue to the Exchequer?

Mr. Hayhoe: As my hon. Friend knows, because, like me, he was here for most of the debate, a number of important points were made and comparisons were made with other actions being taken in other parts of the Budget. I said, responding to specific points made by my hon. Friends, that we should give careful consideration to what they have said. They, too, will understand that I am not entering into any commitment or giving any undertaking that reliefs or changes will be made to take account of particular points. I am saying that careful consideration will he given to my hon. Friends' points.

Sir Geoffrey Finsberg: I understand from that that, in accordance with normal conventions, the House will have an opportunity on Report to think again about this, and to take a vote if it thinks it necessary.

Mr. Hayhoe: That will be a matter not for me but for the Chair, which will decide what matters will be debated. I do not want there to be any misunderstanding from my hon. Friends. They will have heard my clear words that these matters will be considered without commitment as to change being made.

Sir William Clark: I am sure that the House agrees with my hon. Friend and recognises difficulty. All that my hon. Friend the Member for Hampstead and Highgate (Sir G. Finsberg) asked was whether we should have an opportunity to discuss this on Report. Quite rightly, my hon. Friend the Minister said that this is a matter for the Chair. I ask my hon. Friend this straight question—would he welcome and encourage a debate on Report?

Mr. Hayhoe: I am neutral towards such a suggestion. If the House wishes to discuss these matters then, they will be debated. I do not want to give any sign, which perhaps my hon. Friend is seeking to draw from me, that there is some commitment. If we understand each other, that is helpful.

Mr. Christopher Hawkins: rose—

Mr. Hayhoe: I have given way several times on this matter.

Mr. Hawkins: rose—

The Chairman (Mr. Harold Walker): Order. The Minister is clearly not giving way.

Mr. Hayhoe: Perhaps I will give way to my hon. Friend.

Mr. Hawkins: What is the logic behind the fact that on page 154 of schedule 12 to the Finance (No. 2) Bill it says that the changes in capital allowances will not apply to any contracts made on or before 13 March, Budget day? All we are asking is for that same clause to apply to the change in VAT on building extensions.

Mr. Hayhoe: That point was made earlier in the debate and will be taken into account. The VAT extensions that have been under discussion yield a significant amount of money. They are essential to the Budget strategy of my right hon. Friend the Chancellor and I hope that the House will reject the amendment of the right hon. Member for Sparkbrook.

Mr. Hattersley: I hope that I am not being unduly uncharitable when I say to the Minister of State, Treasury, that one or two hon. Memnbers will feel that he did not adequately answer every point during the discussion. Indeed, those who could hear what he said above the laughter which accompanied the last 10 minutes of his speech will have noticed one overwhelming point. He said to his hon. Friends rather more often than he said to my hon. Friends, "Do not bother me about equity. Do not confuse me with arguments about justice. We are interested in the tax-raising capacities of the various measures." When the Minister's hon. Friends ask him why he treats the VAT proposal on alterations in a different way and on a different date from capital allowances and the composite rate for the banks, the answer is clear. One is a revenue raising measure and the others do not have the same attraction to the Treasury. When revenue raising is involved little arguments, such as retrospective taxation, are brushed aside. The revenue argument transcends all other considerations such as equity and the usual practices of good taxation.
If it is any consolation to the Minister, despite the way in which he told his hon. Friends that he had nothing whatever to offer them—he could not have rubbed it in more severely—and although he would think about it, he would not think about it in any way that brought about any alteration, I am sure that they will troop into the Lobby with him. They are like the building industry. The Conservative party can do it damage and cause embarrassment, but it will still keep producing the votes and producing the money.
The Labour party notices that the Minister has not made any attempt to answer the four or five basic criticisms of this tax and the way that it is being imposed.
The Minister blandly said that we are over-gloomy about the prospects of the building industry. He said not a word about those prospects being the result not of my judgment but of the judgment of the building industry itself. It is the judgment not of the Union of Construction, Allied Trades and Technicians but the Federation of Master Builders and all those other employer organisations which give the Minister so much support at election time. They are now saying that what the Government have done will reduce employment and output and increase bankruptcies. It is the building industry which says those things, and it is the building industry which the Minister so blandly sweeps aside.
The Minister, with a disingenuity which I thought even beyond him, speaking to his hon. Friend the Member for Rutland and Melton (Mr. Latham), said, "Of course we are against the black economy; of course we are against the


moonlighters." I hope that the Minister will concentrate, because I want to remind him of what he said about the black economy and moonlighters in February. He chided my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) for misquoting his previous views on the black economy. Therefore, in order that there shall be no confusion, and certainly no misinterpretation of the Minister's attitude to such matters, I shall read what he said in February:
It is fallacious to assume that the black economy is all bad. It certainly contributes to growth within our society".—[Official Report, 9 February 1984; Vol. 53, c. 1013.]
There follows a supplementary question from one of my hon. Friends. Reading on reveals that I read every word of the hon. Gentleman's answer. If he will allow me to do so, I give him high marks for consistency in the period February to May.
What he now advocates is a justification of his position. He is enhancing the prospects of the black economy; he is encouraging the black economy; he is giving the black economy opportunities that it never had before. He ought to know — his hon. Friends know, and have said so throughout the debate — that what he proposes and defends now means that the black economy will flourish as it has never previously flourished in the building industry. I do not chide the Minister. I congratulate him on the consistency of his support for that sector of our national life.
It is absurd for the Minister to think he convinced the Opposition or his hon. Friends simply by saying that the Government know there are anomalies, but that it would be a good tax indeed that did not involve anomalies of any kind. When the Chancellor told the House of this new tax, on Budget day, he said that the object of introducing it into the sector to which it now applies was to avoid anomalies. His hon. Friends have pointed out time and again that the anomalies have been increased and enhanced.

The Chancellor of the Exchequer (Mr. Nigel Lawson): Nonsense.

Mr. Hattersley: The Chancellor says "Nonsense." The right hon. Gentleman was not present when many hon. Members gave examples, and some hon. Members are now nodding in agreement. I take the garage example to which the Minister of State should have turned his mind. He should have told us how he justifies the position that a garage built when a house is built is not taxed, while an identical garage built a fortnight after the house is completed is taxed. He should have turned his mind to the question posed by his own Back Benchers as to whether a house purchaser can announce that the transaction is not complete because he has in mind to build a garage in the following year or the year after that.
The Minister never attempted to deal with any of those questions. The reason why he did not attempt to deal with them I can describe in two sentences. He did not attempt to deal with them because he knew that the case against the tax was overwhelming. The only justification for it was the hope—not the certainty—of £450 million extra for the Revenue. But not even that is certain, because most people assume that so much work will be postponed or will go to the black economy that the Treasury will make nothing from the additional tax. The entire operation is an absurdity. The Minister of State had the short straw tonight. We will divide the House to demonstrate that we, at least, are prepared to tell the truth about this nonsense.

Question put, That the amendment be made:—

The House divided: Ayes 139, Noes 235.

Division No. 257]
[11.12 pm


AYES


Anderson, Donald
Leighton, Ronald


Ashley, Rt Hon Jack
Lewis, Ron (Carlisle)


Ashton, Joe
Lofthouse, Geoffrey


Atkinson, N. (Tottenham)
McCartney, Hugh


Bagier, Gordon A. T.
McDonald, Dr Oonagh


Barron, Kevin
McGuire, Michael


Beckett, Mrs Margaret
McKay, Allen (Penistone)


Beggs, Roy
McKelvey, William


Beith, A. J.
McNamara, Kevin


Bell, Stuart
McTaggart, Robert


Bermingham, Gerald
McWilliam, John


Bidwell, Sydney
Madden, Max


Blair, Anthony
Marshall, David (Shettleston)


Boyes, Roland
Maxton, John


Bray, Dr Jeremy
Meacher, Michael


Brown, R. (N'c'tle-u-Tyne N)
Meadowcroft, Michael


Brown, Ron (E'burgh, Leith)
Michie, William


Caborn, Richard
Mikardo, Ian


Callaghan, Jim (Heyw'd &amp; M)
Milian, Rt Hon Bruce


Carter-Jones, Lewis
Miller, Dr M. S. (E Kilbride)


Clark, Dr David (S Shields)
Molyneaux, Rt Hon James


Clay, Robert
Morris, Rt Hon A. (W'shawe)


Cocks, Rt Hon M. (Bristol S.)
Nicholson, J.


Cohen, Harry
Oakes, Rt Hon Gordon


Coleman, Donald
O'Brien, William


Conlan, Bernard
Owen, Rt Hon Dr David


Cook, Frank (Stockton North)
Park, George


Corbyn, Jeremy
Parry, Robert


Cowans, Harry
Patchett, Terry


Craigen, J. M.
Penhaligon, David


Crowther, Stan
Pike, Peter


Cunliffe, Lawrence
Powell, Rt Hon J. E. (S Down)


Davies, Rt Hon Denzil (L'lli)
Prescott, John


Dixon, Donald
Randall, Stuart


Dormand, Jack
Redmond, M.


Dubs, Alfred
Rees, Rt Hon M. (Leeds S)


Duffy, A. E. P.
Richardson, Ms Jo


Eadie, Alex
Robinson, G. (Coventry NW)


Eastham, Ken
Rogers, Allan


Fatchett, Derek
Rooker, J. W.


Faulds, Andrew
Ross, Ernest (Dundee W)


Field, Frank (Birkenhead)
Ross, Stephen (Isle of Wight)


Fisher, Mark
Ross, Wm. (Londonderry)


Flannery, Martin
Ryman, John


Foot, Rt Hon Michael
Sedgemore, Brian


Foster, Derek
Sheldon, Rt Hon R.


Fraser, J. (Norwood)
Silkin, Rt Hon J.


George, Bruce
Skinner, Dennis


Gould, Bryan
Smith, C.(Isl'ton S &amp; F'bury)


Gourlay, Harry
Smyth, Rev W. M. (Belfast S)


Hamilton, James (M'well N)
Soley, Clive


Hamilton, W. W. (Central Fife)
Spearing, Nigel


Harman, Ms Harriet
Stewart, Rt Hon D. (W Isles)


Hart, Rt Hon Dame Judith
Stott, Roger


Hattersley, Rt Hon Roy
Thomas, Dr R. (Carmarthen)


Hawkins, C. (High Peak)
Thorne, Stan (Preston)


Hogg, N. (C'nauld Kilsyth)
Tinn, James


Holland, Stuart (Vauxhall)
Walker, Cecil (Belfast N)


Howells, Geraint
Wallace, James


Hoyle, Douglas
Wardell, Gareth (Gower)


Hughes, Dr. Mark (Durham)
Wareing, Robert


Hughes, Robert (Aberdeen N)
Weetch, Ken


Hughes, Roy (Newport East)
Welsh, Michael


Hughes, Sean (Knowsley S)
Williams, Rt Hon A.


Janner, Hon Greville
Wilson, Gordon


Jones, Barry (Alyn &amp; Deeside)
Woodall, Alec


Kaufman, Rt Hon Gerald
Young, David (Bolton SE)


Kennedy, Charles



Kilroy-Silk, Robert
Tellers for the Ayes:


Kirkwood, Archibald
Mr. Frank Haynes and


Lamond, James
Mr. Austin Mitchell.


Leadbitter, Ted







NOES


Adley, Robert
Goodhart, Sir Philip


Aitken, Jonathan
Goodlad, Alastair


Alexander, Richard
Gorst, John


Alison, Rt Hon Michael
Gow, Ian


Amess, David
Greenway, Harry


Arnold, Tom
Gregory, Conal


Ashby, David
Griffiths, E. (B'y St Edm'ds)


Aspinwall, Jack
Griffiths, Peter (Portsm'th N)


Atkins, Rt Hon Sir H.
Grist, Ian


Baldry, Anthony
Ground, Patrick


Batiste, Spencer
Grylls, Michael


Bellingham, Henry
Hamilton, Neil (Tatton)


Bendall, Vivian
Hampson, Dr Keith


Berry, Sir Anthony
Hanley, Jeremy


Biggs-Davison, Sir John
Hannam, John


Bonsor, Sir Nicholas
Hargreaves, Kenneth


Boscawen, Hon Robert
Harris, David


Bowden, A. (Brighton K'to'n)
Haselhurst, Alan


Bowden, Gerald (Dulwich)
Havers, Rt Hon Sir Michael


Boyson, Dr Rhodes
Hawkins, Sir Paul (SW N'folk)


Braine, Sir Bernard
Hawksley, Warren


Brandon-Bravo, Martin
Hayes, J.


Bright, Graham
Hayhoe, Barney


Brinton, Tim
Hayward, Robert


Brittan, Rt Hon Leon
Heathcoat-Amory, David


Brooke, Hon Peter
Henderson, Barry


Brown, M. (Brigg &amp; CI'thpes)
Hickmet, Richard


Browne, John
Higgins, Rt Hon Terence L.


Bruinvels, Peter
Hirst, Michael


Bryan, Sir Paul
Hogg, Hon Douglas (Gr'th'm)


Buchanan-Smith, Rt Hon A.
Holland, Sir Philip (Gedling)


Buck, Sir Antony
Hooson, Tom


Budgen, Nick
Howard, Michael


Bulmer, Esmond
Howarth, Gerald (Cannock)


Burt, Alistair
Howell, Rt Hon D. (G'ldford)


Butcher, John
Howell, Ralph (N Norfolk)


Butterfill, John
Hubbard-Miles, Peter


Carlisle, John (N Luton)
Hunter, Andrew


Carlisle, Kenneth (Lincoln)
Hurd, Rt Hon Douglas


Carttiss, Michael
Jenkin, Rt Hon Patrick


Chalker, Mrs Lynda
Jessel, Toby


Chope, Christopher
Johnson-Smith, Sir Geoffrey


Clark, Dr Michael (Rochford)
Jones, Gwilym (Cardiff N)


Clark, Sir W. (Croydon S)
Jones, Robert (W Herts)


Clarke, Rt Hon K. (Rushcliffe)
Jopling, Rt Hon Michael


Clegg, Sir Walter
Kellett-Bowman, Mrs Elaine


Cockeram, Eric
Key, Robert


Colvin, Michael
King, Roger (B'ham N'field)


Coombs, Simon
Knight, Mrs Jill (Edgbaston)


Cope, John
Knowles, Michael


Corrie, John
Knox, David


Couchman, James
Latham, Michael


Cranborne, Viscount
Lawler, Geoffrey


Currie, Mrs Edwina
Lawrence, Ivan


Dorrell, Stephen
Lawson, Rt Hon Nigel


Douglas-Hamilton, Lord J.
Lee, John (Pendle)


Dover, Den
Leigh, Edward (Gainsbor'gh)


du Cann, Rt Hon Edward
Lennox-Boyd, Hon Mark


Dunn, Robert
Lester, Jim


Dykes, Hugh
Lewis, Sir Kenneth (Stamf'd)


Edwards, Rt Hon N. (P'broke)
Lilley, Peter


Eggar, Tim
Lloyd, Ian (Havant)


Emery, Sir Peter
Lloyd, Peter, (Fareham)


Fallon, Michael
McCrindle, Robert


Fenner, Mrs Peggy
Macfarlane, Neil


Finsberg, Sir Geoffrey
MacKay, Andrew (Berkshire)


Fletcher, Alexander
MacKay, John (Argyll &amp; Bute)


Forman, Nigel
McNair-Wilson, P. (New F'st)


Forth, Eric
Major, John


Fowler, Rt Hon Norman
Malins, Humfrey


Fox, Marcus
Malone, Gerald


Freeman, Roger
Maples, John


Fry, Peter
Marland, Paul


Gale, Roger
Marlow, Antony


Galley, Roy
Mather, Carol


Gardiner, George (Reigate)
Maude, Hon Francis


Gardner, Sir Edward (Fylde)
Mawhinney, Dr Brian


Garel-Jones, Tristan
Maxwell-Hyslop, Robin


Glyn, Dr Alan
Mayhew, Sir Patrick



Mellor, David
Ridley, Rt Hon Nicholas


Merchant, Piers
Ridsdale, Sir Julian


Meyer, Sir Anthony
Roberts, Wyn (Conwy)


Miller, Hal (B'grove)
Rossi, Sir Hugh


Mills, Iain (Meriden)
Rost, Peter


Mills, Sir Peter (West Devon)
Ryder, Richard


Miscampbell, Norman
Sainsbury, Hon Timothy


Mitchell, David (NW Hants)
Shaw, Giles (Pudsey)


Moate, Roger
Shelton, William (Streatham)


Moore, John
Sims, Roger


Morris, M. (N'hampton, S)
Skeet, T. H. H.


Morrison, Hon C. (Devizes)
Soames, Hon Nicholas


Morrison, Hon P. (Chester)
Speller, Tony


Moynihan, Hon C.
Stanbrook, Ivor


Mudd, David
Steen, Anthony


Murphy, Christopher
Stewart, Allan (Eastwood)


Neale, Gerrard
Stewart, Ian (N Hertf'dshire)


Needham, Richard
Stradling Thomas, J.


Nicholls, Patrick
Sumberg, David


Normanton, Tom
Taylor, John (Solihull)


Norris, Steven
Thompson, Donald (Calder V)


Onslow, Cranley
Townend, John (Bridlington)


Oppenheim, Philip
Vaughan, Sir Gerard


Osborn, Sir John
Viggers, Peter


Ottaway, Richard
Wakeham, Rt Hon John


Page, Richard (Herts SW)
Waldegrave, Hon William


Parris, Matthew
Walker, Bill (T'side N)


Patten, Christopher (Bath)
Wardle, C. (Bexhill)


Pawsey, James
Wareing, Robert


Peacock, Mrs Elizabeth
Warren, Kenneth


Percival, Rt Hon Sir Ian
Watts, John


Pollock, Alexander
Wells, Bowen (Hertford)


Porter, Barry
Welsh, Michael


Powell, William (Corby)
Whitney, Raymond


Powley, John
Wiggin, Jerry


Prentice, Rt Hon Reg
Williams, Rt Hon A.


Price, Sir David
Wilson, Gordon


Proctor, K. Harvey
Wolfson, Mark


Rathbone, Tim
Yeo, Tim


Rees, Rt Hon Peter (Dover)
Young, Sir George (Acton)


Rhodes James, Robert

Question accordingly negatived.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 233, Noes 136.

Division No. 258]
[11.24 pm


AYES


Adley, Robert
Bryan, Sir Paul


Aitken, Jonathan
Buchanan-Smith, Rt Hon A


Alexander, Richard
Buck, Sir Antony


Alison, Rt Hon Michael
Budgen, Nick


Amess, David
Bulmer, Esmond


Arnold, Tom
Burt, Alistair


Ashby, David
Butcher, John


Aspinwall, Jack
Butterfill, John


Atkins, Rt Hon Sir H.
Carlisle, John (N Luton)


Baldry, Anthony
Carlisle, Kenneth (Lincoln)


Batiste, Spencer
Carttiss, Michael


Bellingham, Henry
Chalker, Mrs Lynda


Bendall, Vivian
Chope, Christopher


Berry, Sir Anthony
Clark, Dr Michael (Rochford)


Biggs-Davison, Sir John
Clark, Sir W. (Croydon S)


Blaker, Rt Hon Sir Peter
Clarke, Rt Hon K. (Rushclif'e)


Bonsor, Sir Nicholas
Clegg, Sir Walter


Boscawen, Hon Robert
Cockeram, Eric


Bowden, A. (Brighton K'to'n)
Colvin, Michael


Bowden, Gerald (Dulwich)
Coombs, Simon


Boyson, Dr Rhodes
Cope, John


Braine, Sir Bernard
Corrie, John


Brandon-Bravo, Martin
Couchman, James


Bright, Graham
Cranborne, Viscount


Brinton, Tim
Currie, Mrs Edwina


Brittan, Rt Hon Leon
Dorrell, Stephen


Brooke, Hon Peter
Douglas-Hamilton, Lord J.


Brown, M. (Brigg &amp; CI'thpes)
Dover, Den


Browne, John
du Cann, Rt Hon Edward


Bruinvels, Peter
Dunn, Robert






Dykes, Hugh
McCrindle, Robert


Edwards, Rt Hon N. (P'broke)
Macfarlane, Neil


Egger, Tim
MacKay, Andrew (Berkshire)


Emery, Sir Peter
MacKay, John (Argyll &amp; Bute)


Fallon, Michael
McNair-Wilson, P. (New F'st)


Fenner, Mrs Peggy
Major, John


Finsberg, Sir Geoffrey
Malins, Humfrey


Forman, Nigel
Malone, Gerald


Forth, Eric
Maples, John


Fowler, Rt Hon Norman
Marland, Paul


Freeman, Roger
Marlow, Antony


Fry, Peter
Mather, Carol


Gale, Roger
Maude, Hon Francis


Galley, Roy
Mawhinney, Dr Brian


Gardiner, George (Reigate)
Maxwell-Hyslop, Robin


Gardner, Sir Edward (Fylde)
Mayhew, Sir Patrick


Glyn, Dr Alan
Mellor, David


Goodhart, Sir Philip
Merchant, Piers


Goodlad, Alastair
Meyer, Sir Anthony


Gorst, John
Miller, Hal (B'grove)


Gow, Ian
Mills, lain (Meriden)


Greenway, Harry
Mills, Sir Peter (West Devon)


Gregory, Conal
Miscampbell, Norman


Griffiths, E. (By St Edm'ds)
Mitchell, David (NW Hants)


Griffiths, Peter (Portsm'th N)
Moate, Roger


Grist, Ian
Moore, John


Ground, Patrick
Morris, M. (N'hampton, S)


Grylls, Michael
Morrison, Hon C. (Devizes)


Hamilton, Hon A. (Epsom)
Morrison, Hon P. (Chester)


Hamilton, Neil (Tatton)
Moynihan, Hon C.


Hampson, Dr Keith
Mudd, David


Hanley, Jeremy
Murphy, Christopher


Hannam, John
Neale, Gerrard


Hargreaves, Kenneth
Needham, Richard


Haselhurst, Alan
Nicholls, Patrick


Havers, Rt Hon Sir Michael
Normanton, Tom


Hawkins, Sir Paul (SW N'folk)
Norris, Steven


Hawksley, Warren
Onslow, Cranley


Hayes, J.
Oppenheim, Philip


Hayhoe, Barney
Osborn, Sir John


Hayward, Robert
Ottaway, Richard


Heathcoat-Amory, David
Page, Richard (Herts SW)


Henderson, Barry
Parris, Matthew


Hickmet, Richard
Patten, Christopher (Bath)


Higgins, Rt Hon Terence L.
Pawsey, James


Hirst, Michael
Peacock, Mrs Elizabeth


Holland, Sir Philip (Gedling)
Percival, Rt Hon Sir Ian


Hooson, Tom
Pollock, Alexander


Howard, Michael
Powell, William (Corby)


Howarth, Gerald (Cannock)
Powley, John


Howell, Rt Hon D. (G'Idford)
Prentice, Rt Hon Reg


Howell, Ralph (N Norfolk)
Price, Sir David


Hubbard-Miles, Peter
Proctor, K. Harvey


Hunt, David (Wirral)
Rathbone, Tim


Hunter, Andrew
Rees, Rt Hon Peter (Dover)


Hurd, Rt Hon Douglas
Rhodes James, Robert


Jenkin, Rt Hon Patrick
Rhys Williams, Sir Brandon


Jessel, Toby
Ridley, Rt Hon Nicholas


Johnson-Smith, Sir Geoffrey
Ridsdale, Sir Julian


Jones, Gwilym (Cardiff N)
Roberts, Wyn (Conwy)


Jones, Robert (W Herts)
Rossi, Sir Hugh


Jopling, Rt Hon Michael
Rost, Peter


Kellett-Bowman, Mrs Elaine
Ryder, Richard


Key, Robert
Sainsbury, Hon Timothy


King, Roger (B'ham N'field)
Shaw, Giles (Pudsey)


Knight, Mrs Jill (Edgbaston)
Shelton, William (Streatham)


Knowles, Michael
Sims, Roger


Knox, David
Skeet, T. H. H.


Latham, Michael
Soames, Hon Nicholas


Lawler, Geoffrey
Speller, Tony


Lawrence, Ivan
Stanbrook, Ivor


Lawson, Rt Hon Nigel
Steen, Anthony


Lee, John (Pendle)
Stewart, Allan (Eastwood)


Leigh, Edward (Gainsbor'gh)
Stewart, Ian (N Hertf'dshire)


Lennox-Boyd, Hon Mark
Stradling Thomas, J.


Lester, Jim
Sumberg, David


Lewis, Sir Kenneth (Stamf'd)
Taylor, John (Solihull)


Lilley, Peter
Thompson, Donald (Calder V)


Lloyd, Ian (Havant)
Townend, John (Bridlington)


Lloyd, Peter, (Fareham)
Vaughan, Sir Gerard



Viggers, Peter
Wiggin, Jerry


Wakeham, Rt Hon John
Wolfson, Mark


Waldegrave, Hon William
Yeo, Tim


Walker, Bill (T'side N)
Young, Sir George (Acton)


Wardle, C. (Bexhill)



Warren, Kenneth
Tellers for the Ayes:


Watts, John
Mr. Tristan Garel-Jones and


Wells, Bowen (Hertford)
Mr. Douglas Hogg.


Whitney, Raymond



NOES


Anderson, Donald
Kaufman, Rt Hon Gerald


Ashley, Rt Hon Jack
Kennedy, Charles


Ashton, Joe
Kilroy-Silk, Robert


Atkinson, N. (Tottenham)
Kirkwood, Archibald


Bagier, Gordon A. T.
Lamond, James


Barron, Kevin
Leadbitter, Ted


Beckett, Mrs Margaret
Leighton, Ronald


Beggs, Roy
Lewis, Ron (Carlisle)


Beith, A. J.
Lofthouse, Geoffrey


Bell, Stuart
McCartney, Hugh


Bermingham, Gerald
McDonald, Dr Oonagh


Bidwell, Sydney
McGuire, Michael


Blair, Anthony
McKelvey, William


Boyes, Roland
McNamara, Kevin


Bray, Dr Jeremy
McTaggart, Robert


Brown, R. (N'c'tle-u-Tyne N)
McWilliam, John


Brown, Ron (E'burgh, Leith)
Madden, Max


Caborn, Richard
Marshall, David (Shettleston)


Callaghan, Jim (Heyw'd &amp; M)
Maxton, John


Carter-Jones, Lewis
Meacher, Michael


Clark, Dr David (S Shields)
Meadowcroft, Michael


Clay, Robert
Michie, William


Cocks, Rt Hon M. (Bristol S.)
Mikardo, Ian


Cohen, Harry
Milian, Rt Hon Bruce


Coleman, Donald
Miller, Dr M. S. (E Kilbride)


Conlan, Bernard
Molyneaux, Rt Hon James


Cook, Frank (Stockton North)
Morris, Rt Hon A. (W'shawe)


Corbyn, Jeremy
Nicholson, J.


Cowans, Harry
Oakes, Rt Hon Gordon


Craigen, J. M.
O'Brien, William


Crowther, Stan
Owen, Rt Hon Dr David


Cunliffe, Lawrence
Park, George


Davies, Rt Hon Denzil (L'lli)
Parry, Robert


Dixon, Donald
Patchett, Terry


Dobson, Frank
Penhaligon, David


Dormand, Jack
Pike, Peter


Dubs, Alfred
Powell, Rt Hon J. E. (S Down)


Duffy, A. E. P.
Prescott, John


Eadie, Alex
Randall, Stuart


Eastham, Ken
Redmond, M.


Fatchett, Derek
Rees, Rt Hon M. (Leeds S)


Faulds, Andrew
Richardson, Ms Jo


Field, Frank (Birkenhead)
Robinson, G. (Coventry NW)


Fisher, Mark
Rogers, Allan


Flannery, Martin
Rooker, J. W.


Foster, Derek
Ross, Ernest (Dundee W)


Fraser, J. (Norwood)
Ross, Stephen (Isle of Wight)


Freeson, Rt Hon Reginald
Ross, Wm. (Londonderry)


George, Bruce
Ryman, John


Gould, Bryan
Sedgemore, Brian


Gourlay, Harry
Sheldon, Rt Hon R.


Hamilton, James (M'well N)
Skinner, Dennis


Hamilton, W. W. (Central Fife)
Smith, C.(Isl'ton S &amp; F'bury)


Harman, Ms Harriet
Smyth, Rev W. M. (Belfast S)


Hart, Rt Hon Dame Judith
Soley, Clive


Hattersley, Rt Hon Roy
Spearing, Nigel


Hawkins, C. (High Peak)
Stott, Roger


Haynes, Frank
Thomas, Dr R. (Carmarthen)


Hogg, N. (C'nauld &amp; Kilsyth)
Thorne, Stan (Preston)


Holland, Stuart (Vauxhall)
Tinn, James


Howells, Geraint
Walker, Cecil (Belfast N)


Hoyle, Douglas
Wallace, James


Hughes, Dr. Mark (Durham)
Wardell, Gareth (Gower)


Hughes, Roy (Newport East)
Wareing, Robert


Hughes, Sean (Knowsley S)
Welsh, Michael


Janner, Hon Greville
Williams, Rt Hon A.


Jones, Barry (Alyn &amp; Deeside)
Wilson, Gordon






Woodall, Alec
Tellers for the Noes:


Young, David (Bolton SE)
Mr. Allen McKay and



Mr. Austin Mitchell.

Question accordingly agreed to.

Clause 10 ordered to stand part of the Bill.

Finance (No. 2) Bill

Schedule 6

MODIFICATIONS OF SCHEDULE 5 TO VALUE ADDED TAX ACT 1983

Mr. Rooker: I beg to move amendment No. 11, in page 133, line 5, leave out 'ambient air' and insert 'room'.
On page 133, in schedule 6, there is a definition of hot food. It is clearly stated that it is food
which . . . has been heated for the purpose of enabling it to be consumed at a temperature above the ambient air temperature".
Initially, the amendment was tabled as a probing device to ascertain what the Government thought they were doing when they used the phrase "ambient air temperature" in respect of hot food. I understand "ambient" to mean "surrounding", in this instance surrounding the food item. There is a problem, because some food items in cabinets, especially in a fish and chip shop on a very hot day, could be cooler than the room temperature. That sort of potential anomaly should be resolved by the Government having the opportunity to make clear what they mean by "ambient air temperature", and the amendment is designed to provide that opportunity.
When I tabled the amendment I started swotting up what "ambient air temperature" meant. It was then that I came across a Customs and Excise notice that was published on 13 March, headed BN2/84 and entitled
Value Added Tax: Hot Food and Drink".
On page 2 of the notice, hot food is defined as food above room temperature.
There is nothing about ambient air temperature. It is clear that "room temperature" must be "ambient air temperature" according to the Bill, but the VAT notice and the Bill are different. If I am correct in assuming that the two descriptions are the same, the Government will be able to accept the amendment. If they are different, either the Bill or the notice is wrong. I should like to give the Minister a chance to explain what is meant by the Bill before I decide whether to press the amendment to a Division.

Mr. Peter Rees: I appreciate the motives that have led the hon. Member for Birmingham, Perry Barr (Mr. Rooker) to move the amendment. I hope that I can reply as constructively and lucidly as his opening deserves.
It is true that there is a difference in the formulation of the test between the notice that was put out at the time of the Budget and the Bill. That is because the notice is designed as far as possible to be in layman's language and generally intelligible. The hon. Gentleman will readily appreciate that the Bill has to stand up to close forensic probing and examination in a court of law. He will be the first to know that the language used in a court of law is not generally in use in common parlance. I hope that that explains to his satisfaction the difference between the notice and the Bill.
I shall not attempt to paraphrase "ambient", because I think that the hon. Member for Perry Barr understands the word and perhaps the entire Committee does. The notice attempted to explain it, and if I tried to put a second gloss upon it I might confuse rather than elucidate. I shall give one practical reason why the amendment would not be suitable. I look at the amendment with an open mind. I

believe the hon. Gentleman accepts there is no great political principle between us. We want at this point in the debate to achieve a measure that is intelligible for those who must live with the legislation in their daily commercial lives.
I give one example in which room temperature would not be a suitable criterion. There was, for example, a food stall in Parliament square. Room temperature would not be a suitable term to be used in such cases. The legislation is designed to convey the meaning of hot food that has been heated to, and is meant to be consumed, above the general outside temperature, which is not necessarily room temperature.
The hon. Gentleman asked—I accept his point—whether ambient temperature means the temperature in a hot room in which food temperature means the temperature in a hot room in which food temperature is less than room temperature. That is extremely unlikely. Body temperature is 98·6 deg F. A room in which the temperature is 100 deg F would be very hot. Food is, however, regularly consumed at 120, 130 or 140 deg F. The definition in the schedule is designed to exemplify that difference. The legislation intends to cover food meant to be eaten at a temperature normally above room temperature. Obviously, I cannot legislate for the black hole of Calcutta. If we had to construct VAT legislation for that abnormal case, to which we hope British taxpayers will not be exposed in future years, we might come up with some extraordinary results.
Room temperature will not cover every case. The House will next debate factors designed to cover sales to people outside a building or not standing on a premises. We shall consider also sales from stalls in the open air. I am sure that, on reflection, the hon. Gentleman will recognise that his amendment will not suit such occasions. For those perhaps inadequately explained reasons, I hope that the hon. Gentleman will not feel obliged to press the amendment to a Division.

Mr. Rooker: I am grateful for what the right hon. and learned Gentleman has said. He has helped me. I am interested in ensuring that those outside who take note of our debates, especially those in the industry who are interested in this matter, know clearly what it is possible for the Government to do. Because there is a difference between the Bill and the Customs notice, I am worried that people outside might start to mess around with food temperatures. There is no question but that that action could lead to health risks. If a person starts playing around with what he believes is room or ambient temperature, or with containers, a public health risk might be created. If the Chief Secretary to the Treasury makes it clear that ambient temperature and room temperature mean the same and that the Government do not want people to mess around artificially changing temperatures to avoid VAT, thereby creating a health risk, I shall leave the matter as it stands.

Mr. Peter Rees: I accept the hon. Gentleman's point. It is one on which I wished to reassure myself. It would be wrong for registered traders to attempt to do that. In many cases—I shall not assure the Committee that this will always occur—such actions will fall foul of the hygiene regulations. The hon. Gentleman and I both spotted the problem. I hope he recognises that we have done our best to answer it by the precise definition that we have adopted.

Mr. Rooker: I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.

Mr. Rooker: I beg to move amendment No. 13, in page 133, line 7, at end insert—
'(c) paragraph (b) above shall not apply to hot food the items of which are packaged separately.'.

The Chairman: With this it will be convenient to take amendment No. 18, in page 133, line 7, at end insert—
'(c) paragraph (b) above shall not apply to hot food supplied in containers or other packaging provided by the customer.'.

Mr. Rooker: Both amendments are designed to make it clear beyond any doubt that there is a distinction between take-away catering and other forms of catering, such as restaurants. There would be no confusion if the packaging of take-away foods were such that the items were packaged separately. I understand that that is the practice in the Republic of Eire where potato chips are rated at 23 per cent. VAT, as is anything put with them, but if the items are wrapped separately they are zero rated.
Another clear means of making the distinction would be for the customer to provide his or her own packaging for the take-away food. As I said many hours ago—and no one has since rebutted the suggestion—the industry estimates that 80 per cent. of take-away meals in this country are eaten in the home.
A clear and practical distinction between take-away meals and sit-down meals with no possibility of error or evasion would be provided if either or both of the amendments were accepted.

Mr. Peter Rees: Again, I should very much like to oblige the hon. Gentleman on these two amendments. I recognise the Labour party's reservations about the principle of imposing VAT on take-away food, but, on the premise that it is to be imposed, I judge that the hon. Gentleman genuinely seeks to improve the Bill. I wonder, however, whether he has reflected on some of the practical difficulties that would arise from the amendments.
Amendment No. 13 is designed to take out of the charge to tax items of hot food that are packaged separately. Clearly, this is a fine point of contruction. I am advised, however—the Committee will forgive my personalising this—that if the hon. Gentleman went along to the fish and chip shop with an old copy of Hansard to wrap the cod but accepted the chips in paper provided by the shop, the take-away food would not be subject to VAT. If, however, he had no packaging material and had to accept both items in an old copy of the "Perry Barr Chronicle", or whatever is the major newspaper in his area, he would be charged VAT at 15 per cent. I do not know whether our fellow countrymen, who have perhaps not been following our debates as closely as they should, could be persuaded that such a fine and difficult distinction would be worth while. The scope for avoidance—a matter which I know is close to the hon. Gentleman's heart—would certainly be enormous.
Amendment No. 18, again, is designed not to extend VAT at standard rate if the purchaser brings his own packaging. It would thus be a matter of forward planning. If one had time to bring one's own foil container or, to draw on my distant military past, one's own mess tin, the food would not be subject to VAT, but if one had to dash

along in a hurry to buy one's Chinese take-away or curry or fish and chips, one would have to pay VAT. Again, the hon. Gentleman may, on reflection, feel that such a fine distinction might not commend itself to our fellow countrymen.
Starting from the premise that take-away food should be subject to VAT — I recognise the Opposition's reservations about the principle—I should have thought that the kind of distinction suggested by the hon. Gentleman would be too haphazard and whimsical in operation to achieve much support outside the Committee. I hope that the hon. Gentleman, on reflection, will feel able to seek leave to withdraw the amendment.

Mr. Rooker: The Minister and my constituents clearly occupy different strata of the world. If a take-away food enterprise was given the opportunity to say to its customers, "If you bring your own packaging, there will be 15p in the pound off", that would make a considerable difference to the business in question.
I do not entirely follow the Minister's point on amendment No. 13 about the use of Hansard or another journal. I do not deny that there would be problems connected with amendment No. 13. However, the main thrust of my earlier argument is relevant. Fish and chip shops represent 49 per cent. of take-away outlets, and it would be easy for the fish and the chips to be packaged separately in packaging provided by the shop. The amendment does not require the customer to take his own packaging.
I do not believe that the amendments are at all impracticable, but, at this time of night, I do not intend to press amendment No. 13 to a Division.
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.

Mr. Rooker: I beg to move amendment No. 14, in schedule 6, page 133, line 7, at end insert—
'(c) paragraph (b) above shall not apply to hot food supplied from mobile premises.'.

The Chairman of Ways and Means: With this it will be convenient to discuss the following amendments: No 16, in schedule 6, page 133, line 7 at end insert—
'(c) paragraph (b) above shall not apply to hot food supplied to a customer not situated on the supplying premises.'.
No. 17, in schedule 6, page 133, line 7, at end insert—
'(c) paragraph (b) above shall not apply to hot food supplied to a customer who at the time of supply is situated on the public highway or other premises, not being those of the supplier.'.

Mr. Rooker: Like amendments Nos. 11 and 13, these amendments would clearly distinguish between take-away and sit-down catering, and would destroy the Chancellor's argument about the competition between the two forms of catering.
The amendments are all about cases where the customer is not physically on the premises which are supplying the hot food, or where the premises are mobile, in which case the customer might or might not be on the premises. I accept that it would not be possible to adopt all the amendments together, because in some respects they contradict each other. There is, however, an argument for excluding the mobile take-away operation, whether it is serving fish and chips, Indian food or chicken. I am thinking of a properly-constructed van, conforming to all the necessary regulations. By no stretch of the imagination could hot take-away meals provided from a mobile van whose customers queue on the pavement, in their own road


or elsewhere, be construed as competing—this was the Chancellor's excuse in the Budget debate—with other forms of catering. There is every reason to exclude the supply of hot take-away food from mobile premises from the imposition of VAT.
Amendment No. 16 covers a situation where the customer is not on the premises. The premises could well be a shop, but I suspect that even in Doncaster, Mr. Walker, there are restaurants where there is a window for the supply of some items of hot take-away food. That is quite a normal arrangement. The customer does not enter the premises, and the service provided in no way competes with a sit-down restaurant operation. The customer queues up on the pavement outside the window of a shop where there is a counter for serving hot take-away food. There is every reason for exempting such an operation.
Amendment No. 17 is slightly different as it covers, for example, a fish and chip operation in a football ground car park. I have considered such operations that might be excluded not because of a desire to wreck or filibuster but to point out that a vast area of take-away food business is in no way compatible with restaurant sit-down meal operations. If ever there were a golden opportunity for the Government to help the really small business man, the one-off self-employed person who has used redundancy or unfair dismissal pay and a bank loan to buy and fit out a van to operate a mobile fish and chip shop, here it is. I see no practical difficulties in the Government accepting amendment No. 14.

Mr. Peter Griffiths: I was pleased to see the amendments grouped together as the grouping solves a problem for me. I want to highlight a problem with the Bill and the grouping enables me to know that I am speaking at the right time.
I support the main thrust of the amendments but not as broadly as the hon. Member for Birmingham, Perry Barr (Mr. Rooker). I wish to make a plea on behalf of mobile caterers who operate as part of travelling fairs, which are part of our traditional life, and suffer because of the loss of sites and high transportation costs. Hot food at a travelling fair is often sold not as a meal but as part of the entertainment. Chips and hot doughnuts, for example, are not sold in competition with the rest of the catering industry—not even in competition with the take-away food industry. Such operations are often run on a small scale. Operators of entertainments in fairs are often part of small family businesses and the sale of hot food is frequently ancillary to rides or competitive amusements.
I do not know how far the Opposition intend to press the amendments but I hope that my right hon. and learned Friend will feel able to give me an assurance that he will see how, if the amendments are not pressed or carried, the Bill will affect travelling fairs and their operators who make a valuable contribution to a traditional way of life that we would regret being pushed out of existence because of increased costs.
Another reason why VAT should not be extended to this area is that such small-scale operations are usually run by families, and the sheer bureaucracy of book-keeping and return-making would not be cost-efficient. It would cause a nuisance to the fairground operators and would not produce much revenue for the Treasury. I hope that my

right hon. and learned Friend will monitor the way in which these proposals will affect showmen in travelling fairs.

12 midnight

Mr. Peter Rees: I listened carefully to the hon. Member for Birmingham Perry Barr (Mr. Rooker) who, as I understand it, wishes to draw an even greater distinction between cafes and restaurants, mobile entities purveying take-away food and the static take-away food shop. He buttressed his case by arguing that mobile take-away operations are a useful avenue for the small business man to invest his capital. The hon. Gentleman will be the first to recognise that if we accepted his amendment some large take-away chains might decide to take advantage of this method. For example, the amendment would allow Kentucky Fried Chicken or a hamburger chain to operate in this way. On reflection, the hon. Gentleman will recognise that although it is attractive to say that mobile operations are especially suited to the small business man, his amendment cannot be limited to the small business man.
In reply to the point made by my hon. Friend the Member for Portsmouth, North (Mr. Griffiths), I should say that the very small business man such as he described would normally be below the VAT registration limit of £18,700 turnover.
I ask the hon. Member for Perry Barr to reflect whether it is right to put such emphasis on mobility. In exceptional cases, the amendment might allow other meals to be served in a large mobile caravan. The crux of the hon. Gentleman's case is that if one collects take-away food from the supplier's premises, one should pay tax. If, however, it is brought to one's street or even to one's front door, one should not pay tax. I am not sure that that distinction is worth pursuing. If anything, one could say that a person who must go all the way to a fixed take-away should be advantaged, as against the person who sits in his house and listens to the bell on a van as it comes down the street.
Amendment No. 16 seeks to zero rate hot food supplied to a customer not situated on the supplying premises. The practicalities of that suggestion are that if someone entered a take-away shop through the front door and collected his food in the normal way, he would be charged standard rate VAT. However, if his food was passed to him through a hatch in a side street, he would not. I wonder whether that is the sort of distinction that we want to build into the Bill.
A similar point applies to amendment No. 17. If one is standing on the public highway and the food is served through a hatch—the hon. Gentleman might also have in mind a mobile stall—why is it more meritorious to buy one's take-away food from such an operation, which might be in competition with the fixed take-away shops? That occurs in my constituency of Dover. That case was raised with me for quite different considerations—the people were worried about the planning implications. However, I wonder whether we should build in that advantage for the mobile purveyor of take-away foods. I am not persuaded that such a distinction would commend itself to the world outside.
Throughout our lifetimes we have all enjoyed travelling fairs, and we would be reluctant to do anything that might damage them or the quality of amusement and pleasure that they offer to our fellow countrymen. I do not believe that take-away food is an integral part of what is offered,


nor am I absolutely persuaded that this measure would necessarily affect the kind of supply that my hon. Friend the Member for Portsmouth, North has in mind.
As a matter of law and practice, it would be possible to detach the supply of take-away food and offer it through a related but not the same organisation. Alternatively, if the operators are in the scale that my hon. Friend seems to have in mind, they could be below the registration limit.
I gladly give an undertaking to monitor the situation, but I hope my hon. Friend will not expect me to go any further. We are not in the business of damaging a historic method of entertainment and supply. I hope that the practicalities will be such that when we have reflected on this and monitored it for 12 months, he and I will recognise that nothing fundamental has been done to the travelling fair industry.
On all those grounds, I hope that the hon. Member for Perry Barr will not press his amendments to a Division.

Mr. Rooker: The right hon. and learned Gentleman has not been very helpful. I have been a modicum of reasonableness and have tempered my language. I thought that I made a pretty good case.
I accept that mobile premises need not necessarily be run by the small man. I can envisage the entrepreneurs among my hon. Friends getting organised and knocking that argument from under me. On the other hand, given the way in which the right hon. and learned Gentleman started to respond, I thought that he was about to offer an amendment to amendment No. 14 on Report to meet this point.
The main thrust of all these amendments was not to create further anomalies, and this is where the Minister's argument does not stand up. He spoke of distinguishing between a mobile cafe and a stationary cafe and implied that people should have VAT-free food if they walked to the take-away shop rather than having the food delivered. The situation that these amendments cover are as far removed from the kind of competitive catering that the Chancellor referred to in his Budget speech as the moon is from the sun. This shows that the Government are not prepared to concede that they may be wrong in comparing the vast array of take-away businesses which are not remotely competitive with restaurants.
I agree that this could also apply to big businesses, but not many big businesses carry on mobile take-away operations at present. If they were to create new jobs and take the place of some of the shops that will close, the purpose of the amendment would not be such a bad idea. I shall therefore take the opportunity of asking my hon. Friends to divide the Committee on amendment No. 14.

Question put, That the amendment be made:—

The Committee divided: Ayes 92, Noes 204.

Division No. 259]
[12.09 am


AYES


Atkinson, N. (Tottenham)
Clay, Robert


Bagier, Gordon A. T.
Cocks, Rt Hon M. (Bristol S.)


Barron, Kevin
Cohen, Harry


Beckett, Mrs Margaret
Coleman, Donald


Beggs, Roy
Conlan, Bernard


Beith, A. J.
Cook, Frank (Stockton North)


Benn, Tony
Corbyn, Jeremy


Bermingham, Gerald
Cowans, Harry


Blair, Anthony
Craigen, J. M.


Boyes, Roland
Crowther, Stan


Bray, Dr Jeremy
Cunliffe, Lawrence


Caborn, Richard
Davies, Rt Hon Denzil (L'Ili)


Campbell-Savours, Dale
Dixon, Donald



Dobson, Frank
Meadowcroft, Michael


Dubs, Alfred
Michie, William


Duffy, A. E. P.
Milian, Rt Hon Bruce


Eadie, Alex
Miller, Dr M. S. (E Kilbride)


Fatchett, Derek
Nicholson, J.


Field, Frank (Birkenhead)
O'Brien, William


Fisher, Mark
Park, George


Flannery, Martin
Parry, Robert


Foster, Derek
Patchett, Terry


Fraser, J. (Norwood)
Penhaligon, David


Freeson, Rt Hon Reginald
Pike, Peter


George, Bruce
Prescott, John


Gould, Bryan
Redmond, M.


Hamilton, James (M'well N)
Robinson, G. (Coventry NW)


Harman, Ms Harriet
Rogers, Allan


Hart, Rt Hon Dame Judith
Rooker, J. W.


Hattersley, Rt Hon Roy
Ross, Ernest (Dundee W)


Hogg, N. (C'nauld &amp; Kilsyth)
Ross, Wm. (Londonderry)


Hughes, Sean (Knowsley S)
Sedgemore, Brian


Jones, Barry (Alyn &amp; Deeside)
Skinner, Dennis


Kennedy, Charles
Smith, C.(Isl'ton S &amp; F'bury)


Kirkwood, Archibald
Soley, Clive


Leadbitter, Ted
Spearing, Nigel


Leighton, Ronald
Stott, Roger


Lewis, Ron (Carlisle)
Thomas, Dr R. (Carmarthen)


Lofthouse, Geoffrey
Walker, Cecil (Belfast N)


McDonald, Dr Oonagh
Wallace, James


McGuire, Michael
Wardell, Gareth (Gower)


McKay, Allen (Penistone)
Welsh, Michael


McKelvey, William
Wilson, Gordon


McTaggart, Robert
Woodall, Alec


McWilliam, John



Madden, Max
Tellers for the Ayes:


Marshall, David (Shettleston)
Mr. Frank Haynes and


Maxton, John
Mr. Stuart Bell.


Meacher, Michael



NOES


Aitken, Jonathan
Cope, John


Alexander, Richard
Couchman, James


Amess, David
Cranborne, Viscount


Arnold, Tom
Currie, Mrs Edwina


Ashby, David
Dorrell, Stephen


Aspinwall, Jack
Douglas-Hamilton, Lord J.


Atkins, Rt Hon Sir H.
Dover, Den


Baldry, Anthony
du Cann, Rt Hon Edward


Batiste, Spencer
Dunn, Robert


Bellingham, Henry
Dykes, Hugh


Bendall, Vivian
Edwards, Rt Hon N. (P'broke)


Berry, Sir Anthony
Eggar, Tim


Biggs-Davison, Sir John
Emery, Sir Peter


Blaker, Rt Hon Sir Peter
Fallon, Michael


Boscawen, Hon Robert
Fenner, Mrs Peggy


Bowden, A. (Brighton K'to'n)
Finsberg, Sir Geoffrey


Bowden, Gerald (Dulwich)
Forman, Nigel


Boyson, Dr Rhodes
Forth, Eric


Braine, Sir Bernard
Fowler, Rt Hon Norman


Brandon-Bravo, Martin
Fox, Marcus


Bright, Graham
Freeman, Roger


Brinton, Tim
Fry, Peter


Brooke, Hon Peter
Gale, Roger


Brown, M. (Brigg &amp; Cl'thpes)
Galley, Roy


Bruinvels, Peter
Gardiner, George (Reigate)


Bryan, Sir Paul
Garel-Jones, Tristan


Budgen, Nick
Goodhart, Sir Philip


Bulmer, Esmond
Goodlad, Alastair


Burt, Alistair
Gorst, John


Butcher, John
Gow, Ian


Carlisle, John (N Luton)
Greenway, Harry


Carlisle, Kenneth (Lincoln)
Gregory, Conal


Carttiss, Michael
Griffiths, Peter (Portsm'th N)


Chapman, Sydney
Grist, Ian


Chope, Christopher
Ground, Patrick


Clark, Hon A. (Plym'th S'n)
Grylls, Michael


Clark, Dr Michael (Rochford)
Hamilton, Hon A. (Epsom)


Clark, Sir W. (Croydon S)
Hamilton, Neil (Tatton)


Clarke, Rt Hon K. (Rushcliffe)
Hampson, Dr Keith


Cockeram, Eric
Hanley, Jeremy


Colvin, Michael
Hannam, John


Coombs, Simon
Hargreaves, Kenneth






Harris, David
Mitchell, David (NW Hants)


Havers, Rt Hon Sir Michael
Moate, Roger


Hawkins, C. (High Peak)
Moore, John


Hawksley, Warren
Morris, M. (N'hampton, S)


Hayes, J.
Morrison, Hon C. (Devizes)


Hayhoe, Barney
Morrison, Hon P. (Chester)


Hayward, Robert
Moynihan, Hon C.


Heathcoat-Amory, David
Mudd, David


Henderson, Barry
Murphy, Christopher


Hickmet, Richard
Needham, Richard


Hirst, Michael
Nicholls, Patrick


Hogg, Hon Douglas (Gr'th'm)
Normanton, Tom


Holland, Sir Philip (Gedling)
Norris, Steven


Hooson, Tom
Oppenheim, Philip


Howard, Michael
Osborn, Sir John


Howarth, Alan (Stratf'd-on-A)
Ottaway, Richard


Howarth, Gerald (Cannock)
Page, Richard (Herts SW)


Howell, Rt Hon D. (G'ldford)
Patten, Christopher (Bath)


Howell, Ralph (N Norfolk)
Pawsey, James


Hubbard-Miles, Peter
Peacock, Mrs Elizabeth


Hunter, Andrew
Percival, Rt Hon Sir Ian


Jessel, Toby
Pollock, Alexander


Johnson-Smith, Sir Geoffrey
Powell, William (Corby)


Jones, Gwilym (Cardiff N)
Powley, John


Jones, Robert (W Herts)
Proctor, K. Harvey


Jopling, Rt Hon Michael
Rath bone, Tim


Kellett-Bowman, Mrs Elaine
Rees, Rt Hon Peter (Dover)


Key, Robert
Rhodes James, Robert


King, Roger (B'ham N'field)
Rhys Williams, Sir Brandon


Knight, Mrs Jill (Edgbaston)
Ridley, Rt Hon Nicholas


Knowles, Michael
Roberts, Wyn (Convey)


Knox, David
Ryder, Richard


Latham, Michael
Shaw, Giles (Pudsey)


Lawler, Geoffrey
Shelton, William (Streatham)


Lawrence, Ivan
Shersby, Michael


Leigh, Edward (Gainsbor'gh)
Sims, Roger


Lennox-Boyd, Hon Mark
Skeet, T. H. H.


Lester, Jim
Soames, Hon Nicholas


Lewis, Sir Kenneth (Stamf'd)
Speller, Tony


Lilley, Peter
Stanbrook, Ivor


Lloyd, Peter, (Fareham)
Stewart, Allan (Eastwood)


Macfarlane, Neil
Stewart, Ian (N Hertf'dshire)


MacKay, Andrew (Berkshire)
Stradling Thomas, J.


MacKay, John (Argyll &amp; Bute)
Sumberg, David


McNair-Wilson, P. (New F'st)
Taylor, John (Solihull)


Major, John
Thompson, Donald (Calder V)


Malins, Humfrey
Vaughan, Sir Gerard


Malone, Gerald
Viggers, Peter


Maples, John
Wakeham, Rt Hon John


Marland, Paul
Waldegrave, Hon William


Marlow, Antony
Wardle, C. (Bexhill)


Mather, Carol
Warren, Kenneth


Maude, Hon Francis
Watts, John


Mawhinney, Dr Brian
Whitney, Raymond


Maxwell-Hyslop, Robin
Wiggin, Jerry


Mayhew, Sir Patrick
Wolfson, Mark


Mellor, David
Yeo, Tim


Merchant, Piers
Young, Sir George (Acton)


Meyer, Sir Anthony



Miller, Hal (B'grove)
Tellers for the Noes:


Mills, Iain (Meriden)
Mr. David Hunt and


Mills, Sir Peter (West Devon)
Mr. Tim Sainsbury.

Question accordingly negatived.

Mr. Archy Kirkwood: I beg to move amendment No. 19, in schedule 6, page 133, line 7, at end insert—
'(c) paragraph (b) above shall only apply to caterers providing hot food from retail outlets which have an annual turnover in excess of £100,000.'.
The amendment follows the spirit of the last group of amendments, as implied by the hon. Members for Birmingham, Perry Barr (Mr. Rooker) and for Portsmouth, North (Mr. Griffiths), in that it seeks in a positive way to consider the impact of VAT on hot food as it will affect small business men. The Committee had its say earlier on clause 10, which I regret and think is a

mistake. However, if clause 10 must be retained, it is fair to consider in a positive way the effects that it will have on small businesses.
The Minister said that the VAT cut-off point is currently over £18,000, which I accept. The brevity of my case in no way lessens the importance that I attach to the point. Small business men who purvey a trade in the way of fish and chip shops and small bakers—and all hon. Members have such businesses in their constituencies—with a turnover of below £10,000 are in serious difficulties. The changes made with the acceptance of clause 10 will exacerbate those difficulties.
I freely admit that the annual turnover figure of £100,000 was chosen because the Federation of Self-Employed Small Businesses took the view that 85 per cent. of all businesses in the United Kingdom have an annual turnover of less than £100,000, the bulk being unincorporated businesses. The vast majority of small retail food outlets referred to in the amendment fall into that category. Although we would be prepared in a constructive way to consider some other level of annual turnover, the figure of £100,000 has been chosen in the way that I have described. Some small retail food outlets at the bottom level of the annual turnover league are struggling.
The Government made great play of the way in which they are trying to assist small businesses. The Opposition do not see very much evidence of that on the ground. The magazine produced by the Federation of Self-Employed Small Businesses included an article in its April edition with the headline,
It is a disappointing budget for small businesses.
That is reflected in the discussions that I have had in my constituency with small businesses.
This is a probing amendment to give the Government a chance to consider the situation of small businesses that operate at the bottom of the annual turnover league. I do not believe that this would cost the Government much, but it would do a great deal to provide a service for communities like mine in rural areas. The bulk of such businesses provide hot meals for schoolchildren at lunch time. After all, the cuts in school meals mean that such shops purvey that great Scottish delicacy, the hot pie, to schoolchildren. It is the only hot meal that some of them get during the day. The same applies to fish and chip shops. Indeed, I have a constituency interest. Fishermen in my constituency catch the best cod, which is used in making the traditional Scottish fish supper.
For the sake of some of those small, struggling retail food outlets, the Government could, at little cost, and as a gesture of good will, consider accepting the amendment, or, at least on Report, suggest an annual turnover figure that is acceptable to them. They could then give some of those retail outlets the protection that they so desperately need.

Mr. Madden: I do not want to detain the Committee unduly, but perhaps the Chief Secretary could take this opportunity to give us some information about the way in which the Government intend to apply VAT to the take-away restaurants of the ethnic minorities. Earlier, the Financial Secretary was at pains to point out that the Government's proposals did not represent an attack on their restaurants, but it is beyond dispute that many Asian,


Chinese, Greek and other restaurants will be seriously disadvantaged as a result of imposing VAT on hot take-away food.
I also hope that the Chief Secretary will be able to tell us what steps the Government are taking to ensure that there are bilingual VAT inspectors—and we have been told that only 12 extra inspectors will be recruited to deal with the additional work created — who can give explanations, clarification and assistance to those who will have to operate VAT for the first time. What is being done to produce explanatory notes, notices and other material in the main ethnic minority languages? What steps are being taken to provide information in the main ethnic minority newspapers about the impact of VAT, how it is to be operated, as well as information about other aspects — [Interruption] — that have arisen during our proceedings today.
My comments may be of little concern to Conservative Members, but they pay a great deal of attention to the Asian business sector, and I should have thought they would be prepared to consider seriously the difficulties that that sector will experience in operating VAT, and the problems that they are creating for Asian business men. Such matters are of no little concern to the many Asian business men in my constituency, and no doubt to those in the constituencies of Conservative Members as well.
What arrangements are being made to provide seminars and other means of distributing information to those restaurateurs, who will be involved in the detailed application of VAT? I hope that the Chief Secretary can give us some information, as many of us who represent constituencies with considerable ethnic minority interests will be questioned extensively at our advice centres in the coming weeks and months and about the impact of these proposals. It would be very helpful if material was produced in the languages of the ethnic minorities and if they had information about what steps the Government are taking to assist Asian and other ethnic minority restaurateurs in such matters.

Mr. Rooker: The Opposition sympathise with the amendment. I hope that the Chief Secretary this time will give a figure and tell us the cost of implementing the amendment. All his arguments about VAT on food in relation to previous amendments do not apply. Anomalies will not be created and the arguments about sit-down meals and take aways do not apply. The argument is about the small business man versus big Government. Has the Chief Secretary received representations about the tax?

Mr. Peter Rees: I appreciate the spirit in which the amendment has been moved. I am glad that common ground was established earlier between the principal Opposition party and the Government, because we do not wish to damage small businesses. I am glad that that consensus embraces the Liberal party.
There is a general cut off at £18,700, which will take the small business man out of tax. The amendment proposes that we go wider than that. I am not certain that the suggestion would advantage those whom the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) wishes to benefit, or the general administration of VAT. There would be two cut-off points: £18,700, below which no-one need register, and the Liberals' £100,000, which would not preclude the operator from being registered or

trying to deregister, but would take him, or part of his supplies, out of charge to tax. That would create considerable administrative difficulties. I do not like resisting an amendment on that ground, but I must emphasise the difficulty.
The charge of VAT on take-away foods will advantage to a small degree the cash flow position of small businesses — [Interruption.] The hon. Member for Truro (Mr. Penhaligon) finds this amusing, either because he does not grasp the argument or because there are not many take-aways in Cornwall. I shall explain. Because VAT is charged at the point of supply, but has to be accounted for by the registered trader at the end of three months, it is calculated that on average the delay will be about two-and-a-half months. During that period the trader has the benefit of the customer's money.

Mr. Campbell-Savours: That is nonsense.

Mr. Rees: I know that the hour is late, but. I shall attempt to clarify the argument if the hon. Member for Workington (Mr. Campbell-Savours), who intervenes from a sedentary position, thinks that it is worth it. He has a quick mind and he should reflect overnight. I believe that he will be a member of the Standing Committee. It is calculated that there will be a £4 million cash flow advantage to traders.

Mr. Campbell-Savours: What about turnover?

Mr. Rees: That is a matter for speculation. We discussed that earlier. I am concerned with the impact of the amendment on the trader's cash flow.
I come to a matter of construction, because there is a difficult ambiguity in this amendment, which says that the charge
shall only apply to caterers providing hot food from retail outlets which have an annual turnover in excess of £100,000.
Does that mean that each outlet may have a turnover of up to £100,000? Does it mean that the £100,000 applies only to take-over food, or does it apply to everything?

Mr. Hattersley: Take over?

Mr. Rees: There is nothing improper about a take-over. I know that if the right hon. Gentleman is left in his present position he will acquire a great grasp of financial matters. Coming fresh from Home Office matters, he is perhaps not familiar with take-overs.

Mr. Hattersley: Not as clever as the right hon. and learned Gentleman.

Mr. Rees: The right hon. Gentleman is right. I have to reflect on the legal implications of take-overs. With all the right hon. Gentleman's great responsibilities, he probably has never had to deal with them. We will bear with him until he gets level with his new responsibilities.
The ambiguity inherent in this amendment could let in a much wider range of traders than the hon. Member for Roxburgh and Berwickshire possibly has in mind. I recognise the spirit in which he moved the amendment, but he will understand that on that basis we find it difficult to accept.
I know that the hon. Member for Bradford, West (Mr. Madden)—as I am dealing with his point I assume that he might like to hear what I am saying, but if he does not I shall not trouble the Committee any further—has a strong constituency interest in this matter. However, many ethnic restaurant proprietors have been battling with die complexities of VAT since it was introduced. If they serve


food on the premises, they have been coping since 1972–73. I have no strong information that they have found it more difficult — how can I pick my words with delicacy, Mr. Dean? — than indigenous restaurant proprietors.
If the hon. Member can bring any firm evidence to my attention, or to that of my hon. Friend the Minister of State, that these new provisions will create difficulties in Bradford or other areas, we will see what we can do administratively to assist. We are interested to see that the administration of this measure should be as smooth and effective as possible. I hope that that reply will satisfy the hon. Gentleman.
I know and admire—if he will allow me to say so— the assiduity and relentless precision of the hon. Member for Birmingham, Perry Barr (Mr. Rooker). I am not on this matter—perhaps not for the last time—able to give him a precise figure, because of the ambiguities to which I have drawn attention. I do not wish to sound critical of the amendment. Having served in opposition, I know how difficult it is to produce watertight amendments. In view of the ambiguities I did not think that it was worth costing the amendment. I am sorry, therefore, to cheat the hon. Member out of a precise figure. I will hope to be better briefed on other occasions. On that basis, I hope that the hon. Member for Roxburgh and Berwickshire will not feel obliged to press this matter to a Division.

Mr. David Penhaligon: I believe that we have heard one of the most extraordinary arguments ever presented in favour of a tax increase. The Minister was, in essence, arguing that he has done a great favour to all the little businesses that exist in my county to feed the great tourist trade which is part of Cornwall's economy, whether in north Cornwall or down the north Cornish coast towards St. Ives, by imposing 15 per cent. VAT.
I assure the Minister that within Cornwall I shall do my best to let all those small, independent family businesses which sell some fish and chips for a few months of the year while trying to eke out a living in one of the remoter parts of the country know what a favour he has done them.
It is clear from the Minister's argument that if he had increased VAT on fish and chips to 30 per cent. or 40 per cent. a bonanza would be available in our country. The Minister presented an extraordinary agument. I have heard few others to compare with it during my membership of the House.
The Minister criticises the amendment for its lack of precision on definition. He was fair enough to recognise the problems that sometimes exist for the Opposition.
The Financial Secretary could have costed out a few scenarios involving a limit of £100,000 because it is clear that the amendment refers to the small, one or two-man family business represented by a shop or firm with a turnover of less than £100,000 a year. Small shops in my county which sell fish and chips or Cornish pasties—I assure hon. Members that the pasties that are sold in Cornwall are edible, even if those sold in London are not — should be exempted in the way the amendment suggests.
The hon. Member for Birmingham, Perry Barr (Mr. Rooker) deserves an answer to the question that he asked. If exemption up to £100,000 were given for the family-owned business, what would be the cost? Would it be £1

million, £20 million or £100 million? I suspect that it would not even make a dent in the Chancellor's expectations from the duty. Many of these small businesses feel that they face a rough time ahead, and I suspect that some of them will go to the wall. For the right hon. and learned Gentleman to pretend that a marginal improvement in cash flow makes up for the additional burden being imposed by the Government is outrageous.

Mr. Rooker: As the hon. Member for Truro (Mr. Penhaligon) said, the Financial Secretary put forward a novel argument in saying that this new imposition on these small businesses will aid their cash flow. The fact that the right hon. and learned Gentleman was able to refer to the figure of £4 million in respect of additional cash flow must mean that Treasury officials did some work on the subject, so enabling the Financial Secretary to give the piggy bank effect of VAT on take-away food shops.
It is a basic requirement that, when Opposition Members move amendments and give rough estimates of the cost, Ministers should clarify the position more precisely. In other words, we expect Ministers to come prepared to answer arguments put forward in support of amendments. If the right hon. and learned Gentleman could not give a precise figure, he could at least have said, if such were the case, "This would cost billions of pounds. The amendment must, therefore, be withdrawn."
My earlier reference to the bone idleness of the 1983 intake of Conservative Back Benchers should be applied also to the right hon. and learned Gentleman's advisers at the Treasury if they have not produced any figures for any combination of family firms with turnovers of less than £100,000. As I say, some calculations must have been done to enable the Financial Secretary to mention the figure of £4 million as the piggy bank effect. It is a disgrace that he did not ensure that his staff did their work during the Easter break.

Mr. Kirkwood: We have had a useful exchange on the issues raised by the amendment. I look forward to reading the remarks of the Financial Secretary in the Official Report because I do not have a sharp enough mind to follow the logic of the accounting acrobatics that the right hon. and learned Gentleman put to the Committee. I hope that the Government will give consideration between now and Report to the spirit as well as the content of the amendment. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Latham: I beg to move amendment No. 21, in schedule 6, page 133, line 14, leave out from 'substituted' to end of line 15 and insert—
'(a) in the course of construction or demolition of, or
(b) in the course of alteration work undertaken by:—
(i) registered charities, including churches in respect of their own buildings
(ii) the owners of properties of special historic, architectural or aesthetic merit, in respect of such properties, or
(c)in the course of the construction of free standing properties designed as annexes to existing buildings, and built within their curtilage, but physically separated from them, or
(d) in the course of the conversion of disused or derelict agricultural barns or storehouses for the purposes of creating new residences or industrial properties.'.
I declared my interest in the housebuilding industry in an earlier debate and I shall not repeat it. I shall define the


amendment, which is strictly limited. It would not maintain zero rating for domestic extensions, double glazing or for the majority of items, which we have already discussed, which would be liable to VAT. That is the meaning of paragraph (a).
The first proposal is that alteration work that is done by charities and churches to their own buildings, or by the owners of heritage properties, should remain zero rated. The Churches main committee has expressed its grave concern to hon. Members. It warns that the new tax will amount to a great deal of money additional to the existing bill for VAT which amounts to several million pounds annually. The bill for the Church of England alone might well amount to an addional £5 million a year.
I shall quote briefly two examples. A church in an area of high unemployment is to be extended to provide 100 extra seats at a cost of £30,000. The parish has raised almost £26,000 but is finding it hard going to raise the remaining £4,000. It will now have to raise an extra £4,500, which will be an almost impossible task.
Secondly, the United Reformed Church is spending £275,000 on providing an additional floor in a lofty listed church, which is to be financed from the sale of some land. The cost will increase by about £40,000, which the local congregation has no hope of raising. All hon. Members should regard those as disturbing and serious examples which require remedying.
Many hon. Members are better qualified than I am to speak about heritage properties and the matchless inheritance of Britain. The problem is not so much the maintenance of the great historic houses, for those involved are more concerned about the VAT which is already levied on repairs. It is the fine properties, often in urban areas and essential parts of street scenes, which in recent years have been the target for sensitive conversion rather than demolition. If the practical alternative is now to be demolition and reconstruction at a zero rate, or conversion with 15 per cent. added, the scheme is likely to become entirely unviable and demolition will be threatened, or else the building will decay.
The chief executive of English Heritage, the new name for the Historic Buildings and Monuments Commission for England, Mr. Peter Rumble, has warned hon. Members of the serious effect on the operation of the Building Preservation Trust. The Historic Buildings and Monuments Commission for England received many letters setting out schemes that would have to be halted because the work involved in continuing them would no longer be viable. I understand—this was stated by Lord Montagu of Beaulieu in a letter to The Times of 6 April—that the project for the thermal baths at Buxton has been halted by the Derbyshire Historic Buildings Trust. Exciting schemes, such as converting derelict 19th century and architecturally valuable warehouses or industrial properties, may well become financially unviable—all the more so if they are to be carried out by voluntary or charitable bodies.
I shall mention other examples which have been drawn to my attention involving the Derbyshire Historic Buildings Trust. The first example is Rydes garage, Wirksworth. The cost, net of purchase, was £40,500. It is estimated to break even and the purchaser is unable to increase his payment. There could be completion before 1 June; but the trust would not have proceeded with the project if it had known that VAT would be applicable.
Another example is 14–24 Market place, Eckington. The cost, net of purchase, was £60,000. The decision, is not to proceed beyond the feasibility study stage as the project will barely break even given current market value of properties in the area. It is not possible for savings to cover VAT of about £9,000. The trust states:
No Trust project has ever shown a surplus of 15% (except Golden Valley) and in retrospect it is unlikely that any of the 100 or more properties so far dealt with would have been proceeded with. Therefore in the future ii is certain that the Trust cannot operate as it has, and may face winding up.
The Committee may be aware of the especially strongly worded pamphlet produced by SAVE. One paragraph should suffice. It states:
In the next five years, if Mr. Lawson's proposed changes in VAT are implemented as planned on June 1, the number of applications to demolish listed buildings and buildings in conservation areas will increase dramatically, perhaps tenfold, and local authorities, the Department of the Environment, civic societies and conservation groups will not be able to stem the tide. The number of consents to demolish will rise accordingly and Britain's architectural heritage will be drastically, brutally and irrevocably diminished.
The Historic Buildings and Monuments Commission for England thinks that for the Chancellor to accept the amendment and zero-rate historic or listed buildings might cost about £20 million per annum. As the estimated yield of the tax is about £450 million per annum, that does not seem to be too much to protect our heritage. The Chancellor is a civilised and cultured man. I cannot believe that he wants to be seen as the man who brought bulldozers back as a remedy for the treatment of Britain's matchless street scenes or listed buildings.
I hoped that the proposal in paragraph (c) would be unnecessary and that even the Bill, as it stands. would permit the zero rating of new free-standing buildings within the curtilage of another one. I am worried about this matter because the Royal Institute of British Architects warned its members about a specific example. The institute referred to a new gymnasium on an existing school site, which, although it is detached, is regarded by Customs and Excise as attracting VAT because it is not a new building on its own site. That hardly ties in with the completely contradictory advice, which has apparently been given to the British Property Federation by Customs and Excise, that works of construction involving a single wall facade above foundation level would probably be zero rated when a major interest, freehold or long leasehold, is eventually made.
Surely, we cannot have got ourselves into the position whereby a new separate building would be taxed. but an existing building, of which only the facade had been maintained, would escape the tax. Such anomalies, already coming in show the need to get the details properly sorted out.
Paragraph (d) would zero rate the conversion of agricultural barns or strorehouses into living accommodation or new factories. Every hon. Member who represents a rural area would have many such cases in his or her constituency. Recently, one constituent wrote to me, saying:
I purchased a Grade II listed Tithe Barn . . . in October 1983: the barn was in a state of dilapidation which if uncorrected would have led to its collapse in a short period. I secured full planning permission in January 1984 to restore the barn and convert it to a house for my occupancy. The estimated building costs exceed £60,000—more than the cost of building an equivalent house from scratch. This we did not want to do—we care for old buildings!


It must be contrary to Conservative policy and instinct to opt to prevent old barns being turned into new homes or into rural factories providing employment. I cannot believe that the Government prefer that barns should be demolished and new buildings put in their place or that they should stand empty and eventually fall down.
The amendment is limited in scope. It has substantial support among many experts worried about our heritage and the environment. I commend the amendment to the Committee.

Sir William Clark: I wonder, Mr. Deputy Speaker, whether it would be convenient to discuss my amendment No. 22 with amendment No. 21. It is analogous to the amendment moved by my hon. Friend the Member for Rutland and Melton (Mr. Latham). In view of the lateness of the hour, there would be no point in having two separate debates on a similar subject. The amendment is in page 133, line 17, leave out '(1A)' and insert—
'(1A) Any reference in items 1 or 2 or the following Notes to the construction or demolition of any building includes a reference to a supply which, apart from a structure retained in compliance with conditions made under the Town and Country Planning Act 1971, would be treated as a supply in the course of construction or demolition of a building. (1B)'.

The Second Deputy Chairman (Mr. Paul Dean): If it is acceptable to the Committee, we shall discuss amendments Nos. 21 and 22 together.

Sir William Clark: I fear that in considering planning permission to develop a property the interpretation of a new and an old building is nonsense. My hon. Friend the Member for Rutland and Melton referred to charities. I am sure that my hon. Friend the Minister realises that charities are widely based. I should not for one moment give VAT exemption to, for example, the Moonies. Consequently, until we have fixed the definition of a charity it is difficult to include this in our fiscal system.

Mr. John Hannam: I appreciate my hon. Friend's point about not wanting to give relief to all charities, because there are one or two rather doubtful ones, but all recent Finances Bills have granted relief on covenants to all charities without any more detailed distinction being made.

Sir William Clark: I did not say that I agreed with that. Indeed, I think that it is quite wrong in the case of some charities. I am saying that we should be careful about trying to introduce ideas of what is a charity into fiscal legislation, although I understand the spirit of my hon. Friend's argument. Recognised charities such as churches, those which take care of the handicapped, and so on, should of course be included, but we must have a very clear definition of what is a charity.
Planning permission is sometimes given only if the developer retains one wall, two walls, or whatever. As I said earlier, Customs and Excise is on record as saying that if a developer retains one wall as a facade due to its historical importance that is considered a new building, but if two walls are retained it is an extension of an existing building. I have never heard such rubbish in my life. At that rate, no one will ever develop a corner site, for the simple reason — I say this to my hon. Friend the Minister with the greatest humility —that that corner sites usually have two facades and thus would presumably not qualify for zero rating.
In some inner city buildings, all four walls are of historical importance. It cannot be right that Customs and Excise should be the final arbiter as to what is a new building, depending on how many old walls are left, rather than on what a reasonable person would define as an old building or a new building. The developer, of course, would be delighted to pull all the walls down and thus avoid the expense of shoring them up with scaffolding, and so forth.
It is not only walls that one has to worry about. Many listed buildings have ceilings, staircases and other features that must be preserved. I wonder whether Customs and Excise and Treasury Ministers have considered the effect of this on our old buildings. I shall not rehearse the arguments so excellently made by my hon. Friend the Member for Rutland and Melton, but if we are to maintain the heritage of historic houses we must not do anything that wll act against the preservation of old buildings.
The planning permission argument is indicative here. There is no vested interest or possible collusion between the developer and the planner. If the planning authority lays down conditions for the development and they are met, whether it be the retention of two or three walls, the ceilings, the staircase, or whatever, the development should be regarded as a new building and zero rated. There could also be an anomaly where, in a terrace — a Regency terrace, perhaps—one of the houses is in such bad repair that it must be pulled down and redeveloped. That would be a new building, but there would be two original walls, one on each side. With corner and terrace sites, it is nonsense for Customs and Excise to say, "This is a new building."
I hope that before Report my hon. Friend will give us an assurance—an assurance more categorical than that which he gave us on a previous occasion—that he will consider this matter sympathetically. Otherwise, there will be the ridiculous nonsense of argument after argument about what constitutes a new building, and appeal after appeal. We do not want that.
1 am
I am not arguing about whether VAT should or should not be extended. My argument is that in establishing the principle of a new tax—and this is indeed a new tax, or, one might say, a tax on new products—we should be clear about what we are taxing. We should not leave it to the Customs and Excise to determine whether a building is new or is the extension of an old one.
I trust that I have convinced my hon. Friend that there is a special point to be considered here. The problem will not go away, and it must be reconsidered on Report.

Mr. John Hannam: I support my hon. Friend's amendment, which would provide VAT relief for charities. A campaign has been waged for some time to secure some relief for charities from the burden of VAT. The Charities VAT Reform Group hoped to gain a concession on VAT from the Budget, and the members of the group were very disappointed not to receive such a concession. They were even more taken aback by the proposed imposition of VAT on building alterations, which will add to the financial burden already imposed on them by VAT.
The Charities VAT Reform Group represents about 200 charities. The figures about the extent to which the charities will be affected are frightening. The largest charity — the Imperial Cancer Research Fund — will


have, for the year beginning 1 June, to pay an additional £330,000 in VAT. The National Children's Home will have to pay an additional £200,000. The Jewish Blind Society will have to pay £100,000, the Spastics Society £120,000, Help the Aged £150,000 and the Royal National Institute for the Blind £95,000. Those figures do not account for the exemptions for building alterations which have been given by the Chancellor since the Budget. It is very difficult for charities to assess how those exemptions will affect them, but most of them believe that the effect will be minimal.
The exemptions are laid out in a statutory instrument, the Value Added Tax (Handicapped Persons) Order 1984, which will exempt from tax the construction of ramps or the widening of doorways and passages to assist a disabled person in moving about a building. This will be extended to such work carried out either by a disabled person to his home or by a charity, but not by anyone else.
A further exemption will be given to the installation of for the first time of a bathroom, washroom or lavatory for use by a disabled person, provided that it is on the ground floor of the person's private residence. That exemption will not be extended to lavatories, washrooms or bathrooms installed in any place other than a private residence, and then only if it is for the very first time and on the ground floor.
The large charities which provide residential homes in connection with the purposes for which they are established will benefit from those exemptions only to a very limited extent. It is difficult for them to assess how the exemptions will affect them, but the Spastics Society has been able to estimate a reduction of anything between 25 per cent. and 40 per cent. in the additional burden imposed immediately following the Budget, but that will still leave its VAT bill at anything between £70,000 and £90,000.
The Royal Association for Disability and Rehabilitation has given figures for residential homes. I shall take the example of a short-stay residential home in Norfolk. Various alterations, extensions, adaptations and repairs need to be made to the house, at an estimated net cost of just over £720,000. Immediately following the Budget and the announcement that VAT was being extended to all alterations, the VAT bill was calculated at just over £108,000 and with the recently announced exemptions it has been calculated at £93,000. That compares with a pre-Budget bill of only £30,000. Despite the exemption, therefore, the VAT bill is still three times the bill prior to the Budget and as been reduced by only 14 per cent. The extra £93,000 is no small sum for a charity to raise, purely to pay VAT. It is beyond doubt that many charities will have severely to curtail building work.
Residential homes frequently make good use of old buildings which therefore need a great deal of alteration work. An additional 15 per cent. on the cost of such work will be a severe financial blow. Among many other alterations, homes such as the one in Norfolk that I have mentioned need to provide accessibility to all floors. The all-party disablement group and all disability organisations outside Parliament have been concerned with such provision. We look forward to all new buildings being required to have such accessibility. In the meantime we should do all that we can to encourage alterations to assist people to move about buildings. The exemption from VAT of the installation of ramps recognises the need for horizontal accessibility, but adaptions for vertical mobility

are notably absent from the exemptions. An integral part of that provision is the installation of lifts. Although chair and stair lifts are exempt from VAT their use is restricted. Charities will want to provide larger lifts and yet their installation will not be exempt from VAT.

The Second Deputy Chairman: Order. I am sorry to interrupt the hon. Gentleman., but he is now straying into an amendment that has not been selected. He must restrict his remarks to amendments Nos. 21 and 22.

Mr. Hannam: I was hoping to show the effects on charities of the imposition of VAT and therefore the need to support the amendment to give charities relief. The Royal Association for Disability and Rehabilitation has highlighted work done by some charities, especially those concerned with the elderly and the disabled. Many of the part III residential homes consist of extensions to small homes. Prior to the Budget they would not have been subject to VAT, but it seems that they might well be subject to it now. The charities are utterly unclear and would like some clarification on the matter. I hope that my hon. Friend will give a clearer definition of what is considered an alteration and what is considered construction work in regard to such extensions to smaller buildings.
I have tried to give some idea of the effect of VAT on charities engaged with disabled and handicapped people. Having given the figures and in view of the accepted principle of giving relief to voluntary organisations that raise funds to provide many of the services that the Government ask them to provide, I hope that, having understood the effects of imposing VAT, my hon. Friend will feel the need to examine some way in which to provide relief.
My hon. Friend's amendment refers to charities, churches and heritage buildings, and I, with many of my hon. Friends, fully support the call for relief for this valuable part of our historic fabric. But in the absence of a debate on the problems of the disabled, I ask for consideration to be given to the plight of charities now that, far from being relieved of VAT, they face substantial increases in their tax burden.

Mr. Roger Freeman: I support the amendment of my hon. Friend the Member for Rutland and Melton (Mr. Latham). I also support the plea of the Historic Buildings and Monuments Commission that the Government should zero-rate building alterations to listed buildings. It might help the Committee if I reminded hon. Members of the three justifications for that plea. First, if this proposal goes through unaltered, new construction and demolition will be zero-rated, but alterations will carry a 15 per cent. VAT rate, and although local authorities have the power to prevent buildings from being demolished, the balance will be tipped in favour of demolition. This amendment does not seek to preserve the interests of one section of the community, but seeks to preserve Britain's national heritage.
Secondly, the state sometimes compulsorily lists buildings whether or not the occupants wish it. In those cases, and especially for grade II listed buildings, a financial obligation is placed upon the occupants or owners. If such a burden is placed on them, they should have special VAT status.
Thirdly — I am grateful to the chairman of the Georgian Group for bringing this to my attention—the


cost of alterations to listed buildings is much greater than it is for ordinary residential buildings, not only because of the cost of materials but because of the construction work involved.

Mr. Maxwell-Hyslop: My hon. Friend said that buildings could be listed whether or not their owners wished it. In many cases the owner is not even consulted about whether it should be listed.

Mr. Freeman: My hon. Friend's point raises a different issue. I was addressing the economic obligations and disabilities of those who occupy or own listed properties.
The cost of alterations to listed buildings is approximately five times greater than the cost of altering residential buildings. For those three reasons, I hope that the Minister will say something positive tonight in favour of our heritage.

Mr. Timothy Yeo: I support the amendment moved by my hon. Friend the Member for Rutland and Melton (Mr. Latham). I am worried, as are many hon. Members, about the effect of these proposals on charities. As my hon. Friend the Member for Exeter (Mr. Hannam) said, the financial effects will be disastrous.
The philosophy of the Government's fiscal policy as outlined in the Budget is to shift the burden of tax from income to expenditure. I entirely support the philosophy, which is justified in respect of most taxpayers—higher expenditure taxes are compensated by lower income taxes—but for charities, which do not pay income tax, this increases the burden on one side and offers no compensation on the other. Charities are one of the long-term losers from this philosophy, and the problem is likely to get worse.
1.15 am
I very much regret that the framing of the Budget resolutions prevented us from debating any amendments to remove the burden of VAT from charities completely. It is a pity that such discussion is blocked in this way, but as we cannot discuss that, we can concentrate on building alterations. A large number of charities of all sizes spend a considerable portion of their income on building alterations on their own premises, on the premises of the beneficiaries for which those charities exist and on properties that have been bequeathed and which require adaptation before they can be properly used. Because of that, there will inevitably be a risk that many projects will be jeopardised as a result of their becoming liable to VAT.
My hon. Friend the Member for Exeter listed some of the figures and I wish to add three or four more—the Royal British Legion, £200,000; the Royal National Lifeboat Institution, £45,000; Dr. Barnardo's, £125,000. Those are simply the costs of VAT imposed by this year's Budget in addition to the existing VAT burden which all these organisations bear.
The organisations that have already been mentioned have a total VAT burden running at well over £1 million a year. That is a lot of voluntary fund raising. Many tins will have to be rattled on the street corners merely to benefit Customs and Excise.
All charities with any kind of residential operation will be heavily penalised by these Budget proposals. That will

apply whether those facilities are for children, old people, the handicapped and so on. The small concession referred to earlier is welcome, but the net impact of the Budget proposals is negative even for those charities that deal primarily with disability.
This position is highly anomalous. In many cases these charities provide services that are similar to those provided by local authorities—for example, in special education, old people's homes and residential care for severely handicapped adults and children. It is quite ridiculous that local authorities should be able to recover VAT by virtue of their inclusion under section 20 of the Value Added Tax Act 1983, yet charities that may be carrying out precisely the same functions are unable to recover their VAT. That is particularly unjust at a time when the Government have proclaimed their wish to have a proper partnership between the state and the voluntary sector. I very much hope that my hon. Friend will take account of these points.

Mr. Hattersley: I rise briefly to offer the Opposition's support for the two amendments that we are now discussing.
The Minister of State will recall from the previous debate on the general application of VAT to building alterations that not one of his hon. Friends was able to give the new tax any sort of support. When this debate comes to an end, I think he will find that not one of his hon. Friends will have done other than demand in most passionate terms the exemption of those institutions described in amendment No. 21 and the alterations to the Town and Country Planning Act contained in amendment No. 22.
After a series of speeches of such passion, it would be unthinkable for the Committee to be denied the opportunity to vote on these amendments, especially if the Minister were not prepared to give a more categorical assurance about the Government's attitude than the one he gave in the previous debate. I am sure that the hon. Member for Rutland and Melton (Mr. Latham), with his history in these matters, would not want to seek to ask leave to withdraw his amendment, but were he to do so, I do not think that the Committee would give him leave.
I suspect that the Minister is faced with a dilemma that all Ministers ought to face at some time during their period of office — making a proper promise and a genuine concession, or finding a number of his hon. Friends opposing him in the Lobby.
I have two or three comments to make on the merits of the arguments that have been advanced. The argument relating to charities is obvious and overwhelming. There is a complication in that charities are defined by statute in this country in such a way that, as well as a multitude of virtues, a multitude of sins is included in the definition. I am not disposed to make the distinction in the debate tonight, but the hon. Member for Exeter (Mr. Hannam) advanced such a powerful argument for genuine charitable charities that it must the unanimous view of the Committee that those institutions should not be required to pay tax on the services that they provide for the handicapped, the dispossed and the underprivileged.
The case for the preservation of historic heritage buildings is enhanced by the descriptions that we have all received from those institutions that are trying to reclaim old buildings and are finding, even now, that it is only just possible for them to do so. They are able to demonstrate from their balance sheets that, with an extra 15 per cent.


on the cost, they will be unable to do so. The simple facts were described earlier. Time after time, it will turn out to be more profitable to demolish and rebuild rather than to rehabilitate. That alone should prevent the Government from applying the 15 per cent. VAT in those cases.
Some of the most important work of restoration and preservation is done privately and in the commercial sector. One of the advantages of such work is that the heritage is preserved, and the buildings are kept as living entities, fulfilling some part in the community. They are being used and worked, and that means that they must be rehabilitated and changed on a commercial basis. The 15 per cent. can make all the difference between pulling down and rehabilitating.
For those reasons, I shall ask my hon. Friends to support these amendments when they are voted upon, as I am sure that they will be if the Minister does not give a positive assurance that he will move in the way suggested by his hon. Friends. I do so with the reservation that, as I go to the decaying inner city of Birmingham on Wednesday and Thursday and see houses there to which there should be alterations for the benefit of local communities, I shall feel slightly guilty if the Committee decides that it is not prepared to give assistance to those things that are part of our national heritage.
Having said that, and having done my best in earlier amendments to spare this tax on other worthy causes, when the hon. Member for Rutland and Stamford calls us to vote, I shall be delighted to join him in the Division Lobby.

Mr. Tim Eggar: The question that faces my hon. Friend the Minister is not whether he will give a concession but what sort of concession he will give. I shall address my remarks to the heritage point. How will my hon. Friend give an exemption to the heritage lobby without destroying the whole basis of the extension of VAT? The argument rests on whether the exemption is to be given to conservation areas, as has been argued, or is to be restricted to listed buildings.
If it is to be the latter, to which grade is it to apply? It must be restricted to listed buildings, because the conservation area goes too wide and is likely to have an affect on house prices in conservation areas. I suspect that it may be arguable that it should be restricted further to listed grade 1 buildings and grade 2 star buildings rather grade 2 buildings, and perhaps my hon. Friend will comment on that.
As the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) said, the provisions give incentive to demolishing at the moment. I am not certain how my hon. Friend will get through this one, unless he again gives an exemption for listed buildings, as this seems to be the only logical way to proceed. I am sure that he will enlighten the House.

Mr. Maxwell-Hyslop: I had not intended to intervene, but as it has just been suggested that the category of listed buildings should be truncated to grade 1 or grade 2 star, I make it clear to the Front Bench that anything less than full listed buildings will be unacceptable.
The law, which is unsought by the owner of the building, requires that what in other circumstances would be a demolition followed by the building of a new building, which would be zero rated, must instead be the preservation of certain features of the building, at the

request, not of the owner of the building but of the planning authority. In those circumstances that reconstruction must count as a new construction.
After all, the circumstances when the owner bought that house were not the same as the Bill is attempting to impose. They are not of the owner's making. The Government control listing. It is not done by local authorities. Therefore, the criterion that is used is in the control of a fellow member of the Cabinet. It cannot be claimed that this is open to abuse, except in the sense that listing is suddenly slapped on without consulting the owner of the building and giving him no opportunity to put what could be an entirely reputable case for not listing it. Buildings are sometimes listed in the most arbitrary and unjust manner. However, what is listed is wholly under the Government's control. They should say that where demolition is not allowed because the building is listed, reconstruction therefore, will, under the Bill, count as zero-rated construction. It is up to the Government to amend the law so that such reconstruction is zero rated.

Mr. Hayhoe: This short and important debate has concentrated particularly upon charities and listed buildings of the heritage.
I am advised that paragraph (c) is redundant. The presumption of my hon. Friend the Member for Rutland and Melton (Mr. Latham) was correct. I should certainly be prepared to deal with that further in correspondence if he wishes, and indeed with some of the marginal points that have been made. If hon. Members wish to put them to me I shall attempt to clarify the position.
The debate has concentrated upon the position of charities and my hon. Friends the Members for Exeter (Mr. Hannam) and for Suffolk, South (Mr. Yeo), both of whose work on this aspect of the matter is well known to the House, have argued the case for the general relief on charities in respect of their building work. They will recognise that that would inevitably lead to pressure for relief for other charitable activities. Such general relief has been considered many times and ruled out on cost grounds and on grounds that were referred to by my hon. Friend the Member for Croydon, South (Sir W. Clark) and the right hon. Member for Binningham, Sparkbrook (Mr. Hattersley). Therefore, I am riot able to commend that case to the House. Indeed, the amendment of my hon. Friend the Member for Rutland and Melton appears to go wide in applying to all buildings owned by charities although his intention might well have been to restrict relief to buildings owned and used by charities.
Widespread concern, has been expressed by many hon. Members about the effects on listed buildings of this particular extension of VAT. There are worries that it would lead to demolition of important sections of our heritage and the feeling that something must be done. I accept that as things stand the extension of VAT to building alterations would add to the cost of major works on historic buildings and such work may involve giving a new use to the old building and thus preserving it for posterity. The balance of judgment might well be changed as a result of VAT being applied so that the pressures for demolition would increase, as my hon. Friend the Member for Kettering (Mr. Freeman) so clearly explained. While a general concession would run into problems the existence of statutory lists of buildings of special historical and architectural interest makes it possible to consider a concession which could be limited to structural alterations


to such listed buildings, including churches. Such a relief would be designed to help avoid the further destruction and demolition of heritage buildings. However, I make it clear that repairs and maintenance work would continue to be taxed as under the existing provisions.
I am happy to give the undertaking to the House that between now and Report we will consider a concession along those lines, and I hope that I will be able to announce the detailed provisions of such a concession before the end of May so that we would be ahead of the effective date of bringing building alterations into tax. This could be carried forward, if need be, on an extra stautory basis until the Report stage of the Bill.
In view of that undertaking, I hope that my hon. Friend, recognising that what I have said about structural alterations to listed buildings and churches is a significant concession, will not press the amendment, and that my hon. Friend the Member for Croydon, South will not move his amendment. Although what I have said does not go as far as he would wish, nevertheless, I think it meets a significant worry that has been expressed about listed buildings. I take the point of my hon. Friend who said that one does not differentiate between Grade I and the others. What I have said would concern structural alterations to all listed buildings.

Sir William Clark: Will my hon. Friend clarify something for me? Amendment No. 22 relates to a situation where a planning authority insists that certain parts of a building remain standing, or that certain interior parts of a building may have to remain intact. Can he give me an assurance that between now and Report he will see whether it can be ensured that development is not held up? If planning authority is not given because something has to remain of the old building, development in inner cities particularly will be retarded, which will be detrimental to the economy.

Mr. Hayhoe: I cannot give the assurance in the very wide terms that my hon. Friend seeks. If the buildings are listed, that will be so.

Mr. Hattersley: Can the Minister help me with one further definition? We all welcome the idea that it is all listed buildings and churches, which I take it means all places of worship.

Mr. Hayhoe: Only listed churches.

Mr. Hattersley: It is listed buildings that are churches. As I understand it, the Minister is saying that they will have to fall within both classifications.

Mr. Beith: Having pressed the Minister strongly in the earlier part of the debate, from the alliance Bench I welcome the concession, and the extent of it, to all listed buildings. There are further points and aspects that may not be covered by the concession which we will want to explore when the Bill comes back to the House. However, as the Minister has gone quite a long way on the main point about heritage buildings, I am sure that it would be right for the hon. Gentleman not to press his amendment.

Mr. Latham: I think that all hon. Members will agree that this has been a useful debate. It has ranged over a number of important matters. It would be churlish of me to do other than welcome the concession that my hon. Friend has given from the Front Bench. When a Minister

gives so positive an undertaking as he has done, there is no other honourable course than for the hon. Member concerned to seek to withdraw his amendment.
I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. James Wallace: I beg to move amendment No. 23, in page 133, line 19, leave out 'not'.

The Second Deputy Chairman: With this, it will be convenient to discuss amendment No. 24, in page 133, line 22, at end insert
'with the exception of any conversion, reconstruction, alteration or enlargement of any existing building or civil engineering work, wholly or mainly undertaken for the purpose of insulating, draught proofing, double glazing or in any other way improving its thermal efficiency.'.

Mr. Wallace: The amendments principally seek to exempt from the extension of VAT to building alterations those alterations that are made with the prime intention of improving energy efficiency in houses and factories. Ministers in the Department of Energy regularly tell us that the Government support the concept of energy efficiency. Indeed, for some months Ministers from the Department of Energy have been breakfasting industrialists up and down the country, extolling the virtues of energy conservation. Even more recently, we have been told about it by means of a touring caravan which apparently has something called a talking head. A press release from the Energy Efficiency Office states:
One interesting feature of the Caravan is a talking head, an animated mannequin of Brian Murphy, TV's 'L for Lester'. He tells visitors how he discovered the importance of improving the efficiency of his own heating system by watching his neighbours getting more money to spend on holidays through cutting their energy bills.
So one would hope, or at least think, that one would not have to spell out the arguments in favour of energy conservation and efficiency to this Government.
However, it appears that other Departments try to undo what the Secretary of State does. Last winter, the Welsh Office directed local authorities to freeze funds specifically allocated for domestic insulation. Cutbacks in expenditure on public housing have made it less likely that effective improvements will be done to poorly insulated housing stock. Now the Budget extends VAT to building alterations, including those undertaken for the prime purpose of improving energy efficiency in factories, industrial and business premises and, in particular, houses.
Such an extension of VAT is wrong in principle. The revenue that will accrue to the Treasury as a result cannot match the enormous savings—which we are regularly told about by Ministers from the Department of Energy—that can result fom improving energy efficiency. One of the arguments that the Secretary of State for Energy and his Ministers constantly put forward is that insulation is important because of its cost effectiveness. Indeed, the animated mannequin that is touring with the Energy Efficiency Office caravan is trying to make that very point to householders. One cannot help but think that taxing insulation and energy conservation measures must reduce that cost effectiveness and make that option less attractive to many of those who would otherwise be encouraged to make energy efficiency improvements to their homes.
In turn, that will affect demand, with all the consequences that has for the many small businesses involved in energy conservation. In 1973, at the time of


the oil crisis, when the Department of Energy told us to "Save It!", the energy conservation industry boomed, but in the latter part of the 1970s and the early part of this decade, people became dangerously complacent over expanding North sea oil production and many of the small energy conservation industries suffered badly and some went out of business. It is only in the past year or 18 months that a good number of them have started to see things improve. Now that there is some sign of improvement, it would be disastrous if we allowed a major setback by taxing something that we are told the Government think is a worthwhile objective.
I shall try to anticipate some of the Minister's arguments. In a letter dated 13 April, addressed to me the Secretary of State for Energy gave a reason for believing that this additional tax would not be so important. He said:
The substantial increase in personal disposable incomes, which will result from the changes in income tax, will also help consumers to offset these extra costs.
It defies the imagination to believe that a Budget increase in wages of £1·21 per week, excluding the effect of indexing personal taxation, will in any way influence those who would otherwise have undertaken a major item of capital expenditure involving alterations to improve their home insulation. If the Secretary of State for Energy believes that a small increase in weekly take-home pay will encourage that with an additional 15 per cent. on the capital cost, he is stretching our credibility.
Earlier this month the Secretary of State even said that at least people always had the option of doing work themselves. In a letter to me dated 14 April the Minister said:
successive Governments have consistently resisted pressure to introduce a relief for energy saving work as such.
The argument, "We have never done it before", has been a feature of bureaucratic conservatism for many years. We challenge it. Why should we not give relief to energy saving? After all, the Government give direct financial assistance to nuclear energy production, for instance.
We hear repeatedly about the money that the Government give to the coal industry. Energy conservation is important to our overall energy strategy. Why are the Government not prepared to back that policy with specific relief?
Energy conservation has a role to play in energy strategy. It has an important role in job creation, particularly in rural areas, where there are many old houses with poor insulation, and in inner cities where unemployment is high. It has a social role to play in improving housing stock by providing better insulation and so cutting the fuel bills of many poor, elderly people. We urge the Government to accept the spirit of the amendment and to support their own policies by making an exception for work directed towards conserving energy.

Mr. Bermingham: I do not propose to discuss matters which I discussed earlier but to which the Minister failed to give a satisfactory reply. This amendment deals with insulation. The domestic arguments are well-known, as are the benefits to society. Perhaps the Minister will take on board one point which relates to the industrial sector. If the industrial sector is assisted, as it is currently by other Departments, by being encouraged to develop thermal efficiency, the overall costs will be reduced.
If it is found that such development will cost 15 per cent. more because of the Government's imposition of 15

per cent. VAT on thermal efficiency some industries will be discouraged from investing in that way. Overhead costs of fuel consumption will rise and product prices will also rise.
Surely it would be in everyone's interest to balance overheads and the costs to society and to encourage industry to insulate by not imposing VAT on insulation. A limited amount of energy is available for the next 150 years. It makes sense to conserve oil, coal and nuclear stocks.
1.45 am
It must be in our interests to conserve as much energy as possible so as to stretch the years of fuel availability and keep overall fuel costs down. To do that, we should insulate and ensure that every possible energy conservation method is used. However, we have a Government who preaches the doctrine or of energy conservation and a Treasury which preaches the idea of penalties for conservation.
Whereas the Minister was not prepared to accept the removal of VAT on alterations, I hope that he will accept this amendment dealing with insulation. I hope that the Government will think again.

Mr. Hayhoe: In speaking to these amendments the hon. Member for Orkney and Shetland (Mr. Wallace) concentrated on amendment No. 24. As the House is aware of his interest in energy conservation that i s understandable, and more so perhaps because amendment No. 23, I am advised, would be a wrecking amendment which would have the effect of nullifying the whole of the extension of VAT to building alterations and would have a first-year cost of £250 million and a full-year cost of £450 million. It was the matter that we resolved a moment ago, and I will put it on one side.
The purpose of amendment No. 24 is to zero rate energy-conservation work to existing buildings and civil engineering works. The cost of zero rating such work is not easily quantifiable as much work arguably imposes thermal efficiency. I am advised that it would be in excess of £100 million and would sufficiently affect the overall balance of the Budget for the tax loss to have to be made up in some other way.
I hope that the Committee will accept that wide-ranging exclusions from standard rating of work to existing buildings will inevitably lead to pressure for relief for other types of work. I am sure that we all recognise that improved insulation is highly desirable, but it is arguably no more worthy of special VAT treatment than essential repairs or modernisation, or work to assist crime prevention or home safety. In those circumstances, I must advise the Committee not to accept the amendment.
While one recognises the value of improved insulation, the costs involved are so substantial that I cannot advise the House to accept the amendment, and if it is put to the vote I hope that my hon. Friends will vote to reject it.

Mr. Wallace: The Minister said £100 million. Does that take into account the energy costs which will not be saved and which his hon. Friends in the Department of Energy tell us would be saved?

Mr. Hayhoe: No. The hon. Gentleman has raised a fair point. The figure that I have given is the best estimate of the loss of VAT revenue.

Mr. Wallace: This matter has been given an airing. I beg to ask leave to withdraw the amendment at this stage although we reserve our position as to future action.

Amendment, by leave, withdrawn.

Question proposed, That this schedule be the Sixth Schedule to the Bill:—

The Committee divided: Ayes 183, Noes 66.

Divison No. 260]
[1.48 am


AYES


Aitken, Jonathan
Griffiths, Peter (Portsm'th N)


Alexander, Richard
Grist, Ian


Amess, David
Ground, Patrick


Arnold, Tom
Grylls, Michael


Ashby, David
Hamilton, Hon A. (Epsom)


Aspinwall, Jack
Hamilton, Neil (Tatton)


Atkins, Rt Hon Sir H.
Hampson, Dr Keith


Baldry, Anthony
Hanley, Jeremy


Batiste, Spencer
Hannam, John


Bellingham, Henry
Hargreaves, Kenneth


Berry, Sir Anthony
Harris, David


Biggs-Davison, Sir John
Havers, Rt Hon Sir Michael


Blaker, Rt Hon Sir Peter
Hawksley, Warren


Boscawen, Hon Robert
Hayes, J.


Bowden, A. (Brighton K'to'n)
Hayhoe, Barney


Bowden, Gerald (Dulwich)
Hayward, Robert


Boyson, Dr Rhodes
Heathcoat-Amory, David


Braine, Sir Bernard
Henderson, Barry


Brandon-Bravo, Martin
Hickmet, Richard


Bright, Graham
Hirst, Michael


Brinton, Tim
Hogg, Hon Douglas (Gr'th'm)


Brooke, Hon Peter
Holland, Sir Philip (Gedling)


Brown, M. (Brigg &amp; Cl'thpes)
Hooson, Tom


Bruinvels, Peter
Howard, Michael


Bryan, Sir Paul
Howarth, Alan (Stratf'd-on-A)


Budgen, Nick
Howarth, Gerald (Cannock)


Bulmer, Esmond
Howell, Ralph (N Norfolk)


Burt, Alistair
Hubbard-Miles, Peter


Butcher, John
Hunter, Andrew


Butterfill, John
Johnson-Smith, Sir Geoffrey


Carlisle, Kenneth (Lincoln)
Jones, Gwilym (Cardiff N)


Carttiss, Michael
Jones, Robert (W Herts)


Chapman, Sydney
Jopling, Rt Hon Michael


Chope, Christopher
Kellett-Bowman, Mrs Elaine


Clark, Hon A. (Plym'th S'n)
Key, Robert


Clark, Dr Michael (Rochford)
King, Roger (B'ham N'field)


Clark, Sir W. (Croydon S)
Knight, Mrs Jill (Edgbaston)


Clarke, Rt Hon K. (Rushcliffe)
Knowles, Michael


Cockeram, Eric
Knox, David


Colvin, Michael
Latham, Michael


Coombs, Simon
Lawler, Geoffrey


Cope, John
Lawrence, Ivan


Couchman, James
Leigh, Edward (Gainsbor'gh)


Cranborne, Viscount
Lennox-Boyd, Hon Mark


Currie, Mrs Edwina
Lester, Jim


Dorrell, Stephen
Lewis, Sir Kenneth (Stamf'd)


Douglas-Hamilton, Lord J.
Lilley, Peter


Dover, Den
Lloyd, Peter, (Fareham)


du Cann, Rt Hon Edward
MacKay, Andrew (Berkshire)


Dunn, Robert
MacKay, John (Argyll &amp; Bute)


Dykes, Hugh
Major, John


Edwards, Rt Hon N. (P'broke)
Malins, Humfrey


Eggar, Tim
Malone, Gerald


Fallon, Michael
Maples, John


Fenner, Mrs Peggy
Marland, Paul


Finsberg, Sir Geoffrey
Marlow, Antony


Forman, Nigel
Mather, Carol


Forth, Eric
Maude, Hon Francis


Fox, Marcus
Mawhinney, Dr Brian


Freeman, Roger
Maxwell-Hyslop, Robin


Gale, Roger
Mayhew, Sir Patrick


Galley, Roy
Mellor, David


Gardiner, George (Reigate)
Merchant, Piers


Goodhart, Sir Philip
Meyer, Sir Anthony


Goodlad, Alastair
Miller, Hal (B'grove)


Gorst, John
Mills, Iain (Meriden)


Gow, Ian
Mills, Sir Peter (West Devon)


Gregory, Conal
Mitchell, David (NW Hants)



Moate, Roger
Shaw, Giles (Pudsey)


Moore, John
Shelton, William (Streatham)


Morris, M. (N'hampton, S)
Shersby, Michael


Morrison, Hon C. (Devizes)
Sims, Roger


Morrison, Hon P. (Chester)
Skeet, T. H. H.


Moynihan, Hon C.
Soames, Hon Nicholas


Murphy, Christopher
Stanbrook, Ivor


Needham, Richard
Stewart, Allan (Eastwood)


Nicholls, Patrick
Stradling Thomas, J.


Normanton, Tom
Sumberg, David


Norris, Steven
Taylor, John (Solihull)


Osborn, Sir John
Thompson, Donald (Calder V)


Ottaway, Richard
Vaughan, Sir Gerard


Page, Richard (Herts SW)
Viggers, Peter


Pawsey, James
Wakeham, Rt Hon John


Peacock, Mrs Elizabeth
Wardle, C. (Bexhill)


Powell, William (Corby)
Warren, Kenneth


Powley, John
Watts, John


Proctor, K. Harvey
Wolfson, Mark


Rathbone, Tim
Yeo, Tim


Rees, Rt Hon Peter (Dover)
Young, Sir George (Acton)


Ridley, Rt Hon Nicholas



Roberts, Wyn (Conwy)
Tellers for the Ayes:


Ryder, Richard
Mr. David Hunt and


Sainsbury, Hon Timothy
Mr. Tristan Garel-Jones.


NOES


Atkinson, N. (Tottenham)
McGuire, Michael


Bagier, Gordon A. T.
McKelvey, William


Barron, Kevin
McWilliam, John


Beckett, Mrs Margaret
Madden, Max


Bell, Stuart
Marshall, David (Shettleston)


Benn, Tony
Maxton, John


Bermingham, Gerald
Meadowcroft, Michael


Boyes, Roland
Michie, William


Caborn, Richard
Miller, Dr M. S. (E Kilbride)


Campbell-Savours, Dale
O'Brien, William


Clay, Robert
Parry, Robert


Cocks, Rt Hon M. (Bristol S.)
Patchett, Terry


Cohen, Harry
Penhaligon, David


Conlan, Bernard
Pike, Peter


Cook, Frank (Stockton North)
Prescott, John


Corbyn, Jeremy
Redmond, M.


Cowans, Harry
Robinson, G. (Coventry NW)


Dixon, Donald
Rogers, Allan


Eadie, Alex
Rooker, J. W.


Fatchett, Derek
Ross, Ernest (Dundee W)


Fisher, Mark
Sedgemore, Brian


Flannery, Martin
Skinner, Dennis


Fraser, J. (Norwood)
Smith, C.(Isl'ton S &amp; F'bury)


Freeson, Rt Hon Reginald
Soley, Clive


George, Bruce
Spearing, Nigel


Gould, Bryan
Stott, Roger


Hattersley, Rt Hon Roy
Wallace, James


Haynes, Frank
Wardell, Gareth (Gower)


Hogg, N. (C'nauld &amp; Kilsyth)
Welsh, Michael


Hughes, Sean (Knowsley S)
Woodall, Alec


Kirkwood, Archibald
Young, David (Bolton SE)


Leadbitter, Ted



Leighton, Ronald
Tellers for the Noes:


Lofthouse, Geoffrey
Mr. James Hamilton and


McDonald, Dr Oonagh
Mr. Allen McKay.

Question accordingly agreed to.

Clause 17

CHARGE OF INCOME TAX FOR 1984–85

2 am

Dr. McDonald: I beg to move, in page 10, line 19, leave out from beginning to 'for' in line 23.

The Second Deputy Chairman: With this it will be convenient to take amendment No. 28, in page 134, line 11, leave out Schedule 7.

Dr. McDonald: The purpose of the amendment is to oppose the abolition of the investment income surcharge, but that purpose must be expressed in a somewhat obscure form, because the Government need not include in the Finance Bill any clause dealing with the investment income surcharge. The reasons for imposing the surcharge in the first place were to discriminate in favour of earned income, as opposed to unearned income. It was a matter of ensuring justice in taxation. This principle was recognised by a former Chancellor of the Exchequer, now Lord Barber, when he announced the Government's intention to introduce the investment income surcharge in his Budget speech in March 1971. He reiterated the principle in March 1972. The investment surcharge came into effect in 1973. It was part of the then right hon. Gentleman's reform of the tax system. The investment income surcharge was designed to replace the old surtax.
In March 1971, when Lord Barber, as he now is, introduced the surcharge, he said that
it will still be necessary to retain the distinction between earned and investment income, this distinction will be made by way of a surcharge on investment income in place of the present earned income relief. But it will be an essential feature of the new system that this surcharge will only apply above a certain level of investment income, so that the first slice of such income will be taxed at the rate applicable to earned income."—[Official Report, 30 March 1971; Vol. 814, c. 1387.]
He reiterated those principles on 21 March 1972, when he said:
I have made it abundantly clear that I regard the present form of discrimination against investment income as unacceptable, the United Kingdom and France are the only two which draw such a distinction to any significant degree."—[Official Report, 21 March 1972; Vol. 833, c. 1386.]
He still accepted the principle that there should be a difference between earned and unearned income.
The Tory Government of 1970 to 1973 introduced the investment income surcharge at the present level of 15 per cent. The only difference was that that Government exempted investment up to £2,000. Over the years that level has crept up to £7,100. The Tory Government of those days accepted that it was important to distinguish between those two types of income. They believed that the Government should look more kindly on people who had gone out to work to earn their wages than on those who acquired wealth by accident or inheritance and needed only to wait at home while the money mounted up.—[Interruption.] That was the important distinction which the Tory Government accepted. The hon. Member for Staffordshire, South (Mr. Cormack) was in the House of Commons at the time, and I do not recall reading any objection that he made then.
The present Chancellor has no such qualms. He has cheerfully abandoned the principles of his Tory predecessors. He claims that by abolishing the investment income surcharge he will help small business men. He says that the investment surcharge
hits the small business man who reaches retirement without the cushion of a company pension scheme".—[Official Report, 13 March 1984; Vol. 56, c. 293.]
That is one group which the right hon. Gentleman sets out to help.
It is extraordinary that the right hon. Gentleman should pick out that group of business men for special protection, as there are many pension schemes for the self-employed small business man. As those schemes are subject to tax

relief, I cannot see why the Chancellor should look so kindly on the foolish virgins who fail to save for their old age through a proper pension scheme.
The Chancellor also claims to protect the pensioners, but he will protect only those with income-yielding assets of £70,000 or more, assuming a pre-tax return of about 10 per cent. if the return is lower, greater total assets will be needed to benefit from the concession.
The purpose of abolishing the surcharge is to reduce by 15 per cent. the marginal income tax rates of the tiny minority of taxpayers—about 1 per cent.—previously subject to the surcharge and especially to reduce the top rate of income tax from 75 to 60 per cent.
Even before the Chancellor took this decision, most investment incomes were subject to a lower average tax liability than equivalent earned income because, unlike wages, investment incomes are not subject to national insurance contributions. Abolishing the surcharge therefore does not make the rate of tax the same for unearned as for earned income. It means that the rate for unearned income is much lower. For example, the tax on earned income of £7,000 per year is £1,154—assuming that the taxpayer has the married man's allowance only—plus £630 national insurance contributions. Taking the two elements together, this means that the tax as a percentage of gross income is 25 per cent. The total tax payable on unearned income of £7,000 will now be £1,154 only—a total tax take of 16 per cent., which is much lower than the rate payable on earned income.
In abolishing the surcharge the Chancellor is reducing the burden of taxation on unearned income to a far greater extent than that on earned income. Moreover, the benefit will go to a very small number of taxpayers. The Chancellor claims that he wishes to help pensioners, but only a tiny minority of pensioners—150,000 of them—are among the estimated 270,000 taxpayers who would otherwise pay the surcharge.
The hon. Member for Cannock and Burntwood (Mr. Howarth) regaled us with tales of visits to fish and chip shops in his constituency, where people seemed not only to welcome the imposition of VAT on their fish and chips but to be enraptured by the proposed abolition of the investment income surcharge. As they must all have al: least £70,000 tucked away in the bank, an additional 15 per cent. on their fish and chips, which seem fairly expensive in the hon. Gentleman's area, would presumably be no skin off their noses. Indeed, an unusually high proportion of the 270,000 taxpayers previously subject to the surcharge must live in Cannock for the fish and chip shops to be so full of people welcoming the news of its abolition.
I have mentioned a figure of £70,000, but many of those who will benefit from the abolition have more than that. The average level of investment income would have stood at about £16,000 in 1984–85. To get £16,000 of investment income, savings of about £133,000 would be needed if we assume a pre-tax yield of 12 per cent. The taxpayers concerned are extremely well-off. Some of those people are to be found among the 150,000 pensioners of whom the Chancellor seems to be so fond. Sixty thousand of the 150,000 pensioners would have had investment incomes of over £15,000 last year, and that would imply that they had savings of about £130,000. Abolition will cost £360 million in a full year.
The Chancellor told us that one of the reasons for introducing this measure was his anxiety to help


pensioners. However, he could have helped a million pensioners at a cost of only £185 million by reversing the housing benefit cuts announced earlier this year. He could also have eliminated one of the main grievances over the Budget—the fact that the age allowance is to be raised by only 5·3 per cent. instead of 12·5 per cent. That would hae cost £130 million in a full year. It would have helped more than 2 million pensioners and brought 0·2 million pensioners out of tax altogether.
The Chancellor's claim to be helping the foolish business man who fails to make a proper pension arrangement for his old age, and his claim to be concerned about pensioners, are spurious. If he really had such concerns he would, with £360 million to spend, have done far better not to concentrate it all on 150,000 pensioners and a few others below pension age, most of whom do not need his help. He has poured £360 million down the drain by spending it on the rich. That is typical of the Budget and the present Government's earlier Budgets. If the Chancellor's claims had any foundation, he could have spent that money in a far more effective way.

Mr. Peter Rees: I—[HON. MEMBERS:"Hear, hear".] I am overwhelmed. I congratulate the hon. Member for Thurrock (Dr. McDonald) on the ingenuity of the amendment that has made it possible for this debate to take place, but there is little else on which I can congratulate her.
I thought that the encouragement of investment was common ground between the two major parties. The encouragement of investment at home has been the theme of many debates. If that is so, is it right to impose a surcharge on savings or investment income? I should also like to correct one misconception that I thought had been put to rest in earlier debates: that a person who pays investment income surcharge must necessarily possess a large capital sum. That would not necessarily be the case. If he had been—to use the hon. Lady's inelegant phrase—a foolish business man, he might just have been able to buy an annuity, and be paying investment income surcharge on it.
The outside world will not relish the harsh statement of the hon. Lady, which seems to derive more from the parable of the foolish virgins than from any contemporary view of modern life. I make no comment on the hon. Lady's own position. The repeal will, to a large degree, benefit the elderly—over half of the 280,000 who will be taken out of charge to tax—and people living on relatively small savings income.
On that basis, I hope that the Government's action will commend itself to the Committee and that the Committee will think it right to reject the hon. Lady's amendment, should she feel disposed to press it to a Division.

Dr. McDonald: It appears that the Chief Secretary has brought his fan club with him this evening. I wonder whether it is composed of beneficiaries of this change. A few are shaking their heads in disagreement. They must be the poor members of the club.
I find it extraordinary that the Chief Secretary should talk of £140 a week as a small income. There are many people for whom it is not, and it is about time that he and Conservative Members faced the reality of life in Britain.
There are about 7·5 million low-paid people, and many people live on the state pension or on an income a little above it. They have suffered badly from the changes to taxation and benefits that the Government have made. We shall naturally have to push the amendment to a Division.

Question put, That the amendment be made:—

The Committee divided: Ayes 56, Noes 169.

Division No. 261]
[2.15 am


AYES


Atkinson, N. (Tottenham)
McDonald, Dr Oonagh


Barron, Kevin
McKay, Allen (Penistone)


Beckett, Mrs Margaret
Madden, Max


Bell, Stuart
Meadowcroft, Michael


Bermingham, Gerald
Michie, William


Boyes, Roland
Miller, Dr M. S. (E Kilbride)


Caborn, Richard
O'Brien, William


Campbell-Savours, Dale
Parry, Robert


Clay, Robert
Patchett, Terry


Cocks, Rt Hon M. (Bristol S.)
Penhaligon, David


Cohen, Harry
Pike, Peter


Cook, Frank (Stockton North)
Prescott, John


Corbyn, Jeremy
Redmond, M.


Cowans, Harry
Robinson, G. (Coventry NW)


Dixon, Donald
Rogers, Allan


Eadie, Alex
Rooker, J. W.


Fatchett, Derek
Sedgemore, Brian


Fisher, Mark
Skinner, Dennis


Flannery, Martin
Smith, C.(Isl'ton S &amp; F'bury)


Fraser, J. (Norwood)
Soley, Clive


Freeson, Rt Hon Reginald
Spearing, Nigel


George, Bruce
Wallace, James


Gould, Bryan
Wardell, Gareth (Gower)


Hattersley, Rt Hon Roy
Welsh, Michael


Hogg, N. (C'nauld &amp; Kilsyth)
Woodall, Alec


Hughes, Sean (Knowsley S)
Young, David (Bolton SE)


Kirkwood, Archibald



Leadbitter, Ted
Tellers for the Ayes:


Leighton, Ronald
Mr. James Hamilton and


Lofthouse, Geoffrey
Mr. Frank Haynes.


NOES


Alexander, Richard
Cope, John


Amess, David
Couchman, James


Ashby, David
Cranborne, Viscount


Aspinwall, Jack
Currie, Mrs Edwina


Atkins, Rt Hon Sir H.
Dorrell, Stephen


Baldry, Anthony
Douglas-Hamilton, Lord J.


Batiste, Spencer
Dover, Den


Bellingham, Henry
du Cann, Rt Hon Edward


Berry, Sir Anthony
Dunn, Robert


Biggs-Davison, Sir John
Edwards, Rt Hon N. (P'broke)


Blaker, Rt Hon Sir Peter
Eggar, Tim


Bowden, A. (Brighton K'to'n)
Fallon, Michael


Bowden, Gerald (Dulwich)
Fenner, Mrs Peggy


Boyson, Dr Rhodes
Finsberg, Sir Geoffrey


Brandon-Bravo, Martin
Forman, Nigel


Bright, Graham
Forth, Eric


Brinton, Tim
Freeman, Roger


Brooke, Hon Peter
Gale, Roger


Brown, M. (Brigg &amp; Cl'thpes)
Galley, Roy


Bruinvels, Peter
Gardiner, George (Reigate)


Budgen, Nick
Goodhart, Sir Philip


Bulmer, Esmond
Goodlad, Alastair


Burt, Alistair
Gorst, John


Butcher, John
Gregory, Conal


Butterfill, John
Griffiths, Peter (Portsm'th N)


Carlisle, Kenneth (Lincoln)
Grist, Ian


Carttiss, Michael
Ground, Patrick


Chapman, Sydney
Grylls, Michael


Chope, Christopher
Hamilton, Hon A. (Epsom)


Clark, Hon A. (Plym'th S'n)
Hamilton, Neil (Tatton)


Clark, Dr Michael (Rochford)
Hanley, Jeremy


Clark, Sir W. (Croydon S)
Hannam, John


Clarke, Rt Hon K. (Rushcliffe)
Hargreaves, Kenneth


Cockeram, Eric
Harris, David


Colvin, Michael
Havers, Rt Hon Sir Michael


Coombs, Simon
Hawkins, C. (High Peak)






Hawksley, Warren
Miller, Hal (B'grove)


Hayes, J.
Mills, lain (Meriden)


Hayhoe, Barney
Mills, Sir Peter (West Devon)


Hayward, Robert
Mitchell, David (NW Hants)


Heathcoat-Amory, David
Moate, Roger


Henderson, Barry
Moore, John


Hickmet, Richard
Morris, M. (N'hampton, S)


Hirst, Michael
Morrison, Hon C. (Devizes)


Hogg, Hon Douglas (Gr'th'm)
Morrison, Hon P. (Chester)


Holland, Sir Philip (Gedling)
Moynihan, Hon C.


Hooson, Tom
Murphy, Christopher


Howard, Michael
Needham, Richard


Howarth, Alan (Stratf'd-on-A)
Nicholls, Patrick


Howarth, Gerald (Cannock)
Normanton, Tom


Howell, Ralph (N Norfolk)
Norris, Steven


Hunt, David (Wirral)
Osborn, Sir John


Hunter, Andrew
Ottaway, Richard


Johnson-Smith, Sir Geoffrey
Page, Richard (Herts SW)


Jones, Gwilym (Cardiff N)
Pawsey, James


Jones, Robert (W Herts)
Peacock, Mrs Elizabeth


Jopling, Rt Hon Michael
Powell, William (Corby)


Kellett-Bowman, Mrs Elaine
Powley, John


Key, Robert
Proctor, K. Harvey


King, Roger (B'ham N'field)
Rathbone, Tim


Knight, Mrs Jill (Edgbaston)
Rees, Rt Hon Peter (Dover)


Knowles, Michael
Roberts, Wyn (Conwy)


Knox, David
Ryder, Richard


Latham, Michael
Sainsbury, Hon Timothy


Lawler, Geoffrey
Shersby, Michael


Lawrence, Ivan
Sims, Roger


Leigh, Edward (Gainsbor'gh)
Skeet, T. H. H.


Lennox-Boyd, Hon Mark
Soames, Hon Nicholas


Lester, Jim
Stanbrook, Ivor


Lewis, Sir Kenneth (Stamf'd)
Stewart, Allan (Eastwood)


Lilley, Peter
Stradling Thomas, J.


Lloyd, Peter, (Fareham)
Sumberg, David


MacKay, Andrew (Berkshire)
Taylor, John (Solihull)


MacKay, John (Argyll &amp; Bute)
Thompson, Donald (Calder V)


Major, John
Viggers, Peter


Malins, Humfrey
Wakeham, Rt Hon John


Malone, Gerald
Wardle, C. (Bexhill)


Maples, John
Warren, Kenneth


Marland, Paul
Watts, John


Mather, Carol
Wolfson, Mark


Maude, Hon Francis
Yeo, Tim


Mawhinney, Dr Brian
Young, Sir George (Acton)


Maxwell-Hyslop, Robin



Mayhew, Sir Patrick
Tellers for the Noes:


Mellor, David
Mr. Robert Boscawen and


Merchant, Piers
Mr. Tristan Garel-Jones.


Meyer, Sir Anthony

Question accordingly negatived.

Dr. McDonald: I beg to move amendment No. 27, in page 10, line 27, at end add—
'(4) Payments to any person of invalidity benefit under the Social Security Act 1975 shall not be liable to income tax until the 5 per cent. abatement of invalidity pension, made under the Social Security (No. 2) Act 1980 shall have been made good.'.
The main purpose of the amendment, which is difficult to frame because of the rules of the House of Commons, is to ask the Government to restore at long last the 5 per cent. abatement of invalidity benefit. This is the long-term contributory benefit for men and women below retirement age unable to work because of disability or chronic sickness. Anyone still unable to work after 28 weeks on sickness benefit will automatically qualify, and most of the people who receive it will never be able to work again. They remain on invalidity benefit until they reach retirement age.
This benefit is currently claimed by a large number of people. Last year, 900,000 people claimed it, and it is an important benefit intended specifically for sick and disabled people.
Two forms of treatment have been dished out to these people by the Government. First, they cut the benefit by breaking the link between earnings and benefit, by which the benefit was to go up in line with earning or prices, whichever was the greater. Secondly, in 1980 the invalidity pension was uprated by 5 per cent. less than the expected rise in prices, because the Government said that this benefit, like others, should be subject to tax. They said that they would allow that cut until such time as it was possible to find a way of taxing the benefit.
Up to now the Government have been quite unable to do that. This means that a single person would be getting £34·05 a week had the invalidity pension been raised as much as the retirement pension, whereas he gets only £32·60 a week. Similarly, a married couple would get £54·50 a week instead of £52·15.
It is obvious that the Government think that such small differences of a couple of pounds a week are neither here nor there, and that is because the Treasury and social security Ministers have no idea of what it is like to live on this amount of money a week, where £1 or £2 a week can make quite a difference to the comfort of the people. The Ministers have therefore been happy to let this abatement go on year by year, and to allow the position of invalidity pensioner to deteriorate.
2.30 am
These are people who live in conditions of real poverty. Being ill or disabled imposes all kinds of extra costs, and the Government have chosen to do this group of people—the disabled—out of money that is due to them. Their other actions have imposed great burdens on these people, such as taking away from those who just get the invalidity pension any right to special payments on social security and allowing them to pay the £1·60 prescription charges, which soon get through a single person's £32 a week, which is a meagre amount of money to live on. Many of the invalidity pensioners are not entitled to free prescriptions, and did benefit from single social security payments.
After the way in which the Chief Secretary talked about £140 a week as being a modest income, I do not know how he can look at such sums and know that not only healthy people have to live on them, but the sick and the disabled. I am not surprised that he looks away—no doubt he is really ashamed that this is the kind of thing that the Government have imposed on 900,000 people. It is worth contrasting all this with the molly-coddling of 270,000 rich taxpayers, about whose position we have been talking.
Even the Social Security Advisory Committee report for 1982–83 said that the abatement should be made good, and that the Government had given firm assurances that the abatement of invalidity payment would be made good once that benefit was brought into taxation. That was 1982–83. In spite of those firm assurances, the Government admitted recently in a parliamentary reply that there were still no plans to tax invalidity benefit, and therefore the abatement will continue, and 900,000 people will suffer from living in miserable conditions, and are sick and disabled on top of everything else.
Out of those 900,000 people, it was shown, in that parliamentary reply, that one quarter would not be eligible to pay tax anyway, but they are suffering a 5 per cent. cut in benefit year on year while the Government are dithering about bringing the benefit into taxation, and allowing this


appalling injustice to contine. That is why we have taken the chance offered to us, and have put down this amendment. We beg the Government to look kindly on 900,000 sick and disabled people and give them an extra couple of pounds a week, instead of squandering £360 million in a full year on people who manifestly do not need that amount of money.

Mr. Stuart Bell: I support the amendment tabled by my hon. Friend the Member for Thurrock (Dr. McDonald). It is a pity that we have to debate such an important issue so early in the morning. It is an equal pity that we cannot, on this important occasion, have the undivided attention of the whole committee, especially that of Conservative Members.
This is a most important subject. My hon. Friend mentioned the various ways in which since 1979 the Government have attacked invalidity benefit of those who are sick and unable to work. She mentioned the first attack that had been launched by the Government when they cut the benefit, breaking the link between earnings and prices. She mentioned the second attack in 1980 on the uprating which was less than 5 per cent. The Government continue to launch perpetual attempts to move those who are sick on to the dole queue, from receiving invalidity benefit to unemployment benefit which is consistently less. They do that by medical examinations, most of them cursory, and by regulations that say that a person who is fit for some work is not fit for invalidity benefit but rather should receive unemployment benefit.
It is right that the Committee should know that. The amendment seeks to draw attention to the plight of 900,000 people. Even at this late hour the Government should accept the amendment and do a service to those who are in receipt of invalidity benefit.

Mr. Campbell-Savours: It is opportune that we should have this debate so soon after the previous debate in which the Government were handing back tens of millions of pounds to their friends. Is it not disgraceful that the Government should come to the Chamber tonight and refuse to accept the amendment when they know, as indeed do their supporters on the Conservative Benches, that every indication has been given to the lobbies outside that the Government intend to remove or to deal with the problem of the abatement? We want to know why they are breaking their promises tonight?
Many of my hon. Friends are in the Chamber tonight, as hon. Gentlemen will note, wishing to express their view. If it were not for the time, more of my hon. Friends would take the opportunity to speak. Indeed, there are many precedents for that support. During the previous Parliament on a number of occasions when the Finance Bill and similar matters in relation to unemployment benefit were debated, three Conservative Members were most vociferous in their criticism of this matter. It is significant they have all been promoted in this Parliament. The hon. Member for Bath (Mr. Patten) was banished to Ulster along with the former Secretary of State for Employment, now the Secretary of State for Northern Ireland. The hon. Member for Wiltshire, North (Mr. Needham) has also been promoted and the hon. Member for Watford (Mr. Garel-Jones) has been made a Government Whip.
The Government have been effective in removing those Members who were most vociferous during the previous Parliament. Indeed, they rose repeatedly to press the abatement question. The latest intake of Conservative Members has not been so keen to express such a view. It is significant that on previous amendments Conservative Members have been keen to jump to their feet to defend the interests of their friends who hve everything to lose in the event of the Bill not being enacted as the Government wish. All they have done is seek to protect them, not this group to whom they know that the Government have given clear undertakings. We are asking that the amendment be supported by the Government.

Mr. Bermingham: Does my hon. Friend agree that there seems to be a sick irony in the fact that within the space of a couple of hours an undertaking can be given—an undertaking with which I do not disagree—in respect of ancient monuments and heritage buildings, yet an undertaking cannot be given that sick and elderly human beings will receive about the same amount of money?

Mr. Campbell-Savours: My hon. Friend draws attention to the consistency of the Government. Indeed, my hon. Friends consistently during the debates today have drawn attention to the consistency of the Government.
I wish finally to draw attention once again to what my hon. Friend the Member for Thurrock (Dr. McDonald) referred to as the 250,000 people who would not be paying tax. They have directly lost as a result of the refusal of the Government to budge on this matter. I am told by my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) that they are short now to the tune of £3 per week. The Government owe them that money. They need that money far more than many of the groups that are being helped by the Minister and the Chancellor in the Budget. The Minister owes it to them to pay them. He should ensure equally that moneys are made available from those concessions that have been made to the better off in society to secure the interests of the worse off. That is what fairness in government is all about. Let us see a little fairness tonight.

Mr. Peter Rees: We have had some interesting contributions from the Opposition, but few of the matters raised relate to the Finance Bill, unless it be, of course, that the hon. Member for Thurrock (Dr. McDonald) and her hon. Friends are pressing my right hon. Friend the Chancellor to bring invalidity benefit into charge for tax. If so, my right hon. Friend will, I know, wish to consider when and how that could be done.

Mr. Rooker: We have been asking for that for four years.

Mr. Rees: The hour is late. The hon. Gentleman has had some exciting debates with which to contend, but he must contain himself.
In relation to that matter, an undertaking wss firmly given by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) in his Budget statement of 1981. Since we are in a new Parliament, I am happy to repeat that assurance. In relation to invalidity benefit, we have given an unqualified assurance that, when the benefit is brought into charge for tax, the 5 per cent. deduction made from the November 1980 uprating will be restored. I hope that will—

Mr. Bermingham: rose—

Mr. Rees: No, I have given my answer. The hon. Gentleman has not contributed, except in an intervention during his hon. Friend's speech.
As I said, I am happy to give that assurance. In the meantime, the amendment—and I appreciate why it is framed in this way, and I congratulate the hon. Lady on her ingenuity — is designed to force legislation on the Committee to deal with a situation that has not yet arisen.
On the basis of the unequivocal assurances that I have given, I hope that the hon. Lady will feel able to withdraw the amendment.

Dr. McDonald: I do not see how the Chief Secretary can expect us to accept his unequivocal assurance. This has been said since 1980. It is now 1984. Meanwhile, the living standards of 900,000 invalidity pensioners have fallen considerably. These people cannot wait for the Government to consider their assurances and to wonder when they can introduce taxation. This can be done if the Government have a mind to do it. Invalidity pensioners would be better off if the abatement were restored. Even if that pension were subject to tax, they would certainly be better off than they are now. We cannot accept these meaningless assurances that the Chief Secretary finds it easy and cheap to repeat, just as they have been repeated on more than one occasion by the Government without leading to any action. We shall press the amendment to a Division because, after all, only a vote might fix in the Chief Secretary's head that action now needs to be taken. A number of Conservative Members pleaded with the Government, on more than one occasion in the last Parliament to restore the abatement. Some of them, of course, have been silenced by promotion to the Government, but others have not. If they really mean what they say, if all their protestations of concern for the disabled and sick mean anything, let them join us in the Lobby tonight.

Mr. Bermingham: I had not intended to speak on this issue. I sought to make my point by way of an intervention to my hon. Friend the Member for Workington (Mr. Campbell-Savours), who gave way. However, the Chief Secretary refused to give way to me later and, to put it bluntly, he used a spurious excuse. I shall now make the point quite openly to the Committee, and perhaps the Chief Secretary will then do me the courtesy of replying.
It seems quite iniquitous that, after four years, the Treasury's best minds and the best lawyers available in England cannot find a way in which to calculate the tax and to honour the undertaking of 1980. The tax lawyers of this land have been ingenious enough over the years in finding ways of avoiding and evading tax and making a lot of money out of doing so, yet after four years the Government cannot find a simple way in which to calculate the tax so that an undertaking given in 1980 can be honoured.
The point is as mean and simple as this. We are talking about £3 per week for a married couple if they are liable to tax. That is less than the amount paid by many Conservative Members for a meal. But for a couple on invalidity benefit who live very much in poverty, it means the difference between existence and a little better than existence. That is the reality. Yet after four years the

Government say that they cannot find a way of honouring that undertaking. During those four years a number of couples who would not have paid any tax at all, have been deprived of the £3 per week. If Conservative Members find the matter funny, it is a very sick response to a very serious issue.
A group of those least able to help themselves, who would not be the subject of taxation, must suffer a 5 per cent. or £3 a week abatement, while Government lawyers find time to work out a way of doing things. If the boot had been on the other foot, and the lawyers among Conservative Members had been asked to find a way of avoiding paying £3 a week in tax, they would have been quick enough to find an answer, particularly if someone else was picking up the tab. The Government's action is inexcusable, inexplicable and unjustifiable, and the undertaking that has been so happily and almost cavalierly repeated tonight is a disgrace to the sick and impoverished.
I feel very strongly about this issue, because it is a fundamental source of injustice about which the Government cannot be bothered to do anything. They will give money away to those who have it, but when it comes to those who need it, they can wait year after year. I hope that we shall not be given yet another undertaking in the next Finance Bill, and that somewhere, someone will get his finger out and do something about the situation.

Question put, That the amendment be made:—

The Committee divided: Ayes 55, Noes 162.

Division No. 262]
[2.48 am


AYES


Atkinson, N. (Tottenham)
McDonald, Dr Oonagh


Barron, Kevin
Madden, Max


Beckett, Mrs Margaret
Meadowcroft, Michael


Bell, Stuart
Michie, William


Bermingham, Gerald
Miller, Dr M. S. (E Kilbride)


Boyes, Roland
O'Brien, William


Caborn, Richard
Parry, Robert


Campbell-Savours, Dale
Patchett, Terry


Clay, Robert
Penhaligon, David


Cocks, Rt Hon M. (Bristol S.)
Pike, Peter


Cohen, Harry
Prescott, John


Cook, Frank (Stockton North)
Redmond, M.


Corbyn, Jeremy
Robinson, G. (Coventry NW)


Cowans, Harry
Rogers, Allan


Dixon, Donald
Rooker, J. W.


Eadie, Alex
Sedgemore, Brian


Fatchett, Derek
Skinner, Dennis


Fisher, Mark
Smith, C.(Isl'ton S &amp; F'huiy)


Flannery, Martin
Soley, Clive


Fraser, J. (Norwood)
Spearing, Nigel


Freeson, Rt Hon Reginald
Wallace, James


George, Bruce
Wardell, Gareth (Gower)


Hamilton, James (M'well N)
Welsh, Michael


Hattersley, Rt Hon Roy
Woodall, Alec


Haynes, Frank
Young, David (Bolton SE)


Hughes, Sean (Knowsley S)



Kirkwood, Archibald
Tellers for the Ayes:


Leadbitter, Ted
Mr. Norman Hogg and


Leighton, Ronald
Mr. Allen McKay.


Lofthouse, Geoffrey



NOES


Alexander, Richard
Blaker, Rt Hon Sir Peter


Amess, David
Boscawen, Hon Robert


Ashby, David
Bowden, A. (Brighton K'to'n)


Aspinwall, Jack
Bowden, Gerald (Dulwich)


Atkins, Rt Hon Sir H.
Boyson, Dr Rhodes


Baldry, Anthony
Brandon-Bravo, Martin


Batiste, Spencer
Bright, Graham


Bellingham, Henry
Brinton, Tim


Berry, Sir Anthony
Brooke, Hon Peter


Biggs-Davison, Sir John
Brown, M. (Brigg &amp; Cl'thpes)






Bruinvels, Peter
Gregory, Conal


Budgen, Nick
Griffiths, Peter (Portsm'th N)


Bulmer, Esmond
Ground, Patrick


Burt, Alistair
Grylls, Michael


Butcher, John
Hamilton, Neil (Tatton)


Butterfill, John
Hanley, Jeremy


Carlisle, Kenneth (Lincoln)
Hargreaves, Kenneth


Carttiss, Michael
Harris, David


Chapman, Sydney
Havers, Rt Hon Sir Michael


Chope, Christopher
Hawkins, C. (High Peak)


Clark, Hon A. (Plym'th S'n)
Hawksley, Warren


Clark, Dr Michael (Rochford)
Hayes, J.


Clark, Sir W. (Croydon S)
Hayhoe, Barney


Clarke, Rt Hon K. (Rushcliffe)
Hayward, Robert


Cockeram, Eric
Heathcoat-Amory, David


Colvin, Michael
Henderson, Barry


Coombs, Simon
Hickmet, Richard


Cope, John
Hirst, Michael


Couchman, James
Hogg, Hon Douglas (Gr'th'm)


Cranborne, Viscount
Holland, Sir Philip (Gedling)


Currie, Mrs Edwina
Hooson, Tom


Dorrell, Stephen
Howard, Michael


Douglas-Hamilton, Lord J.
Howarth, Alan (Stratf'd-on-A)


Dover, Den
Howarth, Gerald (Cannock)


du Cann, Rt Hon Edward
Hunt, David (Wirral)


Dunn, Robert
Hunter, Andrew


Edwards, Rt Hon N. (P'broke)
Johnson-Smith, Sir Geoffrey


Eggar, Tim
Jones, Gwilym (Cardiff N)


Fallon, Michael
Jones, Robert (W Herts)


Fenner, Mrs Peggy
Jopling, Rt Hon Michael


Finsberg, Sir Geoffrey
Kellett-Bowman, Mrs Elaine


Forman, Nigel
Key, Robert


Forth, Eric
King, Roger (B'ham N'field)


Freeman, Roger
Knight, Mrs Jill (Edgbaston)


Gale, Roger
Knowles, Michael


Galley, Roy
Knox, David


Gardiner, George (Reigate)
Lawler, Geoffrey


Garel-Jones, Tristan
Leigh, Edward (Gainsbor'gh)


Goodhart, Sir Philip
Lennox-Boyd, Hon Mark


Goodlad, Alastair
Lester, Jim


Gorst, John
Lewis, Sir Kenneth (Stamf'd)



Lilley, Peter
Ottaway, Richard


Lloyd, Peter, (Fareham)
Page, Richard (Herts SW)


MacKay, Andrew (Berkshire)
Pawsey, James


MacKay, John (Argyll &amp; Bute)
Peacock, Mrs Elizabeth


Major, John
Powell, William (Corby)


Malins, Humfrey
Powley, John


Malone, Gerald
Proctor, K. Harvey


Maples, John
Rathbone, Tim


Marland, Paul
Rees, Rt Hon Peter (Dover)


Mather, Carol
Roberts, Wyn (Conwy)


Maude, Hon Francis 
Ryder, Richard


Mawhinney, Dr Brian
Sims, Roger


Maxwell-Hyslop, Robin
Skeet, T. H. H.


Mayhew, Sir Patrick
Soames, Hon Nicholas


Mellor, David
Stanbrook, Ivor


Merchant, Piers
Stewart, Allan (Eastwood)


Meyer, Sir Anthony
Stradling Thomas, J.


Miller, Hal (B'grove)
Sumberg, David


Mills, Iain (Meriden)
Taylor, John (Solihull)


Mitchell, David (NW Hants)
Thompson, Donald (Calder V)


Moate, Roger
Viggers, Peter


Moore, John
Wakeham, Rt Hon John


Morris, M. (N'hampton, S)
Wardle, C. (Bexhill)


Morrison, Hon C. (Devizes)
Warren, Kenneth


Morrison, Hon P. (Chester)
Watts, John


Moynihan, Hon C.
Wolfson, Mark


Murphy, Christopher
Yeo, Tim


Needham, Richard
Young, Sir George (Acton)


Nicholls, Patrick



Normanton, Tom
Tellers for the Noes:


Norris, Steven
Mr. Archie Hamilton and


Osborn, Sir John
Mr. Tim Sainsbury.

Question accordingly negatived.

Clause 17 ordered to stand part of the Bill.

Schedule 7 agreed to.

To report Progress and ask leave to sit again.—[Mr.Peter Rees.]

Committee report Progress; to sit again this day.

WAYS AND MEANS

Capital allowances

The Financial Secretary to the Treasury (Mr. John Moore): I beg to move,
That for the purposes of—

(a) initial allowances under section 1 of the Capital Allowances Act 1968 or paragraph 1 of Schedule 12 to the Finance Act 1982, and
(b) first-year allowances under section 41 of the Finance Act 1971,

provision may be made with respect to expenditure incurred on or after 1st April 1984 under certain contracts.
I apologise for the need to detain the House at this hour. Unfortunately, the existing resolutions which deal with the capital allowance changes do not fully cover these provisions. The resolution which deals with the financial year 1984 covers only the main reductions in rates of allowance for that year. The future year resolution, which is drafted in more general terms, does not cover 1984, so that an additional resolution is required to provide for a reduction in allowances in 1984 arising from the spreading of expenditure into a later year. The provision that it is to cover was announced on Budget day, and thus does not involve any new policy development.

Mr. Jeff Rooker: That having been the straightest speech that we have heard from a Minister at this day's Sitting, we are happy to accept it.

Question put and agreed to.

Train Services (Bromley)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Garel-Jones.]

Mr. Roger Sims: The south eastern division of British Rail, southern, does an enormous job. Each weekday it carries thousands of people from the inner and outer London suburbs to London bridge, Charing cross and Cannon street, nearly all of them within a two-hour period in the morning, returning them during a similar period in the evening. It is a complex piece of organisation. It needs almost split-second timing, particularly over the stretch between New cross and London bridge.
It is obviously sensible that British Rail should review its timetables from time to time to take account of changes in travel patterns and demand, and of course it must plan within the financial constraints imposed on it. New timetables, due to be introduced on 14 May, incorporate a number of changes, many of them understandable and reasonable; for example, reducing the off peak pattern on most of the services from three to two trains per hour. In some cases services have been improved.
My particular concern is with Sundridge park and Bromley north stations, served by a branch line from Grove park, which provide for many of my constituents and those of my hon. Friend the Member for Ravensbourne (Mr. Hunt).
Hitherto, in off peak hours, a shuttle service has been provided between Bromley north and Grove park and at peak hours there have been five through trains from Bromley north to Charing cross or Cannon street, and five similar through services back to Bromley north in the evening.
According to the new timetable, there will be but one through service in the morning, and for those for whom that is not convenient there will be simply a shuttle service to Grove park, where passengers will have to join the main line trains; and similarly in the evening there will he but one through train.
It is not surprising that there were protests when the details of these changes were finally elucidated. I use the expression "finally elucidated" because a feature of this whole matter has been the almost total lack of consultation with, or even advice to, those affected.
Local people are the fare-paying passengers from whom British Rail derives an income of some £700,000 a year. They are also the taxpayers who contribute to British Rail public service obligation grant, of which £266 million comes to London and the south east.
So I think it reasonable to expect that it, or those who represent it, might be consulted on any proposed changes. British Rail says that it has consulted the Transport Users Consultative Committee, but the secretary of the committee tells me that consultation was virtually nil. The committee had a meeting with British Rail in July 1983, at which the general outline service was discussed, but the Bromley north line was not mentioned. In November 1983 more detailed information was given about mainline services, but no information was made available about the south eastern suburban area. British Rail declined to arrange a meeting until after the information about the new services had gone to press. In other words, it gave the


information but would not discuss it until after it had been printed. Even when it started to release information, it said nothing about south eastern suburban services.
The secretary of the TUCC tells me that he received the south eastern suburban timetable at about the middle of March when it had already been printed. It was clear by then that unless some directive was issued by Parliament or by a similar source there was no hope of the time-table being altered. He said:
Our committee deemed it totally disgraceful.
So much for consultation with the TUCC.
British Rail said that it consulted the Greater London Council. I understand that some discussion took place at officer level about the general proposals but that there was no discussion at any level about the Bromley north line and no discussion in council. My opposite number, the GLC member within my constituency, had to wait six weeks for a reply to a letter in which he asked to be told exactly what was happening.
The London borough of Bromley was not consulted and understandably took exception to that and passed a critical resolution, which was conveyed to British Rail. In its reply British Rail stated:
we consulted the GLC.
I have already referred to what that involved. It continued:
We intend no disrespect to London Boroughs, but the fact is that in railway timetable planning terms they are small areas, and experience has shown that they tend to express local views which do not help us a great deal.
One would think that local views would be of some interest and importance to British Rail. Certainly I was not consulted about these matters. I shall not weary the House with details of the correspondence that I had with British Rail, including the long delays that I had to put up with in getting any replies and the inadequate information that I was given. Eventually, I had to get a copy of the new timetable from a constituent rather than from British Rail. The first time that British Rail took any initiative involving me was last week when it telephoned me, having discovered that I was intent on raising the issue in an Adjournment debate.
As the details of the proposals eventually leaked out, I received many letters of protest. Two ladies, Mrs. Caplin and Mrs. Brawn, did more than merely write to me. They organised a petition and quickly obtained 1,700 signatures. Off their own bat they arranged a public meeting in Bromley which attracted more than 300 people. To his credit, the divisional manager of British Rail, Mr. Peter Rayner, attended the meeting and sought to deal with the vigorous questions and criticisms from the floor. He admitted that he had not expected such a strong reaction and he promised to consider it. He has since said that he can add one further through train to the timetable. This will be at 7.37 am before the rush hour and will be of very limited help. There is to be an additional return train at 6.4 pm.
The thinking behind the changes is difficult to understand. There is obviously a demand for the present service and British Rail has the figures. British Rail has had some part in recent developments at Bromley, north, where a bus station, car park and office blocks have been constructed. It seems curious to couple with that development proposals to provide a poorer rather than a better train service. The general manager of British Rail claims that BR is tailoring services to meet demand.
Clearly, in this instance BR is not meeting passengers' needs. Instead of boarding the train at Bromley north or Sundridge park and going through to Charing cross or Cannon street, most passengers will now be subjected to inconvenience by having to alight at Grove park, crossing the bridge and either rushing to a waiting train or waiting for the connection, which may be cancelled, on an open station. That will be especially unpleasant in bad weather. Conditions will be particularly difficult for disabled passengers. Because it is a main-line train, by the time the train reaches Grove park it will be full, as I know from my regular train travel. Passengers know from experience that they must stand, because a similar system operated for a period while engineering work occurred. British Rail says in a letter to the local council:
Whilst we appreciate that trains between Grove Park and London will have substantial loads when they reach Grove Park, the length of time passengers will need to stand is within accepted tolerances.
I am not sure to whom those tolerances are acceptable, but they are unacceptable to my constituents. I am sure that my hon. Friend the Parliamentary Under-Secretary of State remembers that some years ago we travelled on that line. The trains were crowded then, and they are still.
Far from attracting customers, BR seem bent on driving them away from this line. Many people will find that it will be easier for them to take their cars to another station on the main line to catch the train or even to drive all the way up to town. The local fear is that BR will say that the line is not being adequately used, and will close it down altogether.
I remind BR of its response to the Serpell report. Under the heading "Customer Service", BR said:
Our preoccupation in this increasingly competitive industry is with our customers. Some of the options outlined in the Reports for cost reductions would, in our view, impact adversely on service standards by reducing quality; consequently they would reduce revenue.
I suggest that BR should re-read that paragraph in the light of the proposals for the Bromley north line.
I realise that my hon. Friend the Parliamentary Under-Secretary of State cannot be responsible for timetable details, but he is responsible for seeing that BR does its job properly. I ask him first to convey to BR, and endorse, my criticisms of its failure to consult and to seek assurances that in future BR will involve interested parties, including especially Members of Parliament. Because of the recent exchanges, the general manager says that he will seek to consult, but he has said that before. The House understands that I have a certain lack of faith in those assurances. British Rail should consult also the local passenger association. Earlier this year such an association did not exist, but because of this business there is now an active local passenger association. British Rail must include in the discussions the TUCC and especially the borough council in view of the GLC's approaching demise.
Secondly, I ask my hon. Friend to press BR to review the timetable with a view to reinstating adequate peak-hour services as soon as possible. While doing so, perhaps BR could consider improving the very poor late evening service. The last train at 9.34 pm from Charing Cross is useless for theatre and concert goers.
It may seem inappropriate to use parliamentary time to discuss a couple of stations on a short branch line, but this is not simply a matter of personal convenience or inconvenience. The south-east London suburbs depend on


train services. They are our life-blood. We have no underground service. Thousands of people rely on train services to get to and from work. When buying houses people consider shops, schools and not least but most important, transport. Commuter facilities are a vital element and the quality of the train service is a most important factor. The matter is well summed up by a constituent who writes that the rumoured plans strike at the heart of his working life.
I regret that in this instance British Rail has failed to take into account the implications of the proposed changes. I hope that as a result of my raising the matter today it will now do so.

The Parliamentary Under-Secretary of State for Transport (Mr. David Mitchell): I have listened carefully to what my hon. Friend the Member for Chislehurst (Mr. Sims) has said about the Bromley north services. Many of his constituents are quite naturally concerned about the changes proposed by British Rail, and I am sure that they will be grateful to my hon. Friend for raising the matter in the House at this late—or rather early—hour of the morning. My hon. Friend mentioned that he and I had often travelled on that line together in years gone by, so I am not unfamiliar with the problems to which he draws attention.
I should begin by saying that the level of services on particular routes and the timetabling of those services are matters entirely for British Rail, and Ministers have no powers to intervene. The Government have, however, set broad strategic objectives for British Rail, and we are, of course, interested in the way in which it carries them out. We have made it clear that we consider that an efficient railway has a vital role to play in the transport system and that we fully recognise the social value of rail services. Last year the public service obligation grant was about £855 million—a very substantial sum by any reckoning. This year's figure will be similar, and about one third of it is likely to go to support services in London and the south-east.
I should now explain what the timetable changes are and why they have come about. The reduction in loaded train miles over the whole passenger network which British Rail will introduce with the May timetable amounts to less that 1 per cent. In London and the south-east, where the main impact of the changes falls, the reduction is still only 2 per cent.
British Rail has made a number of comments to explain these reductions. In the first place, it points out that they are a response to changes in travel pattern which in turn reflect changes in population and employment in the south-east. British Rail's surveys show that the number of passengers coming into central London on its southern region in the peak hours has declined by over 12 per cent. in the past four years.
Secondly, British Rail has described the changes in the 1984 timetable for southern region as a further stage in its response to the recommendations of the Monopolies and Mergers Commission, whose report on London and south-east commuter services published in October 1980 urged a review of all services to avoid duplication and to ensure that the best use was made of the resources available. After all, the PSO is taxpayers' money.
Against this background, it seems inevitable that some services need to be adjusted, both peak and off peak.
Services have been reduced where demand has fallen and where, in British Rail's view, the existing service frequency no longer provides value for money. Elsewhere, where a demand is high or likely to increase, improvements are planned. For example, the new non-stop Victoria-Gatwick service will make Gatwick the nearest airport to Westminster in terms of time.
I know that British Rail has written to my hon. Friend informing him of the service changes planned for Bromley north, but for the benefit of the wider audience I should take this opportunity to outline them now. The present service in the morning peak consists of five through trains from Bromley north to London and four through trains in the opposite direction. In the evening peak, there are five trains in each direction. Off peak, a 20-minute interval shuttle service operates between Bromley north and Grove park. Passengers change at Grove park for services to Cannon street, London bridge and Charing cross. The peak hour through services and the off peak shuttle services all call also at Sundridge park on the same branch line.
Under the new timetable, which comes into effect on 14 May, British Rail originally proposed that there would be one through train from Bromley north to Charing cross in the morning peak and one through train in the opposite direction in the evening peak. The capacity of the morning through train to Charing cross was to be increased to accommodate extra passengers who currently use other through services. However, as my hon. Friend noted in his speech, British Rail has now decided to run, on a trial basis, an additional through service at the start of the morning peak from Bromley north to Cannon street. I have, however, noted my hon. Friend's comment about the timing of that service.
Apart from these peak hour through services, Bromley north and Sundridge park will be served by a shuttle service between Bromley north and Grove park. The shuttle will run at approximately 10-minute intervals in the peak periods, providing a more frequent service than the existing 20-minute interval peak hour through services. So passengers using Bromley north and Sundridge park in the peak periods will actually have more trains, although they will have to change at Grove park. I am told that under BR's new timetable passengers from Bromley north to Cannon street travelling in the peak periods are likely in most cases to have slightly quicker journeys than at present.
British Rail has explained that its decision to withdraw the peak period through services reflects the fact that at present these trains are much more lightly loaded than those on other routes at these times of day. They range from 36 to 93 per cent. full at the point of maximum loading. My hon. Friend will note that if a peak loading in the rush hour can be as low as 36 per cent., there is at least a prima facie case for saying that a better distribution of the service on other parts of the network which are overcrowded would be reasonable, taking all the travellers in turn.
British Rail believes that it would not make economic sense to perpetuate all these through services. Nor would it be fair to passengers on other lines, who are at the moment travelling in more uncomfortable conditions, if British Rail were not to use to better advantage the permanent way and terminal facilities now occupied by the Bromley north trains.
I recognise that it is of little comfort to my hon. Friend's constituents to be told that people on other services are worse off and will have some improvement. What particularly bothers my hon. Friend's constituents is the thought that, having got a seat at Bromley north or Sundridge park, and having trooped over the foot bridge at Grove park, they will then have to stand all the way into London. I have to say that for some people this will be true. But the overcrowding problem is not as bad as it is sometimes made out.
British Rail estimates that from 14 May only two trains leaving Grove park in the peak hour will be loaded beyond their seating capacity. That does not mean that only two trains will have standing passengers. All regular travellers know that trains can often be jam-packed at the front, when there are still empty seats at the back. My hon. Friend will be familiar, as I am, with the way in which, on trains coming into Charing cross and Cannon street, people crowd to the front because they wish to rush through the barrier at the first opportunity, while seats are available further back in the train. Most of my hon. Friend's constituents should be able to get a seat if they want one. I am sure that, if BR's estimate is wrong, it will be the first to say so. I look to BR to keep an open mind and to be prepared to make further adjustments if experience suggests that would be appropriate. I give my hon. Friend that assurance.
I know that my hon. Friend has been particularly concerned about British Rail's arrangements for consulting users of services and those representing them before introducing substantial changes in the passenger timetable. It is something that he has raised with me more than once and it is, I know, a concern that is shared by hon. Members on both sides of the House.
On another occasion I explained to the House that the long process of revising a timetable involves consultation with the transport users' consultative committees, county councils and commuter groups.
It is a two-stage process. As soon as it can, BR circulates to local authorities its plans for routes and service frequencies. In the case of the 1984 timetable for southern region, this was done on 24 June 1983. But until they have actual timings as well as the frequency and route specifications, the local authorities cannot make detailed comments—for example, about connections with bus services.
The second stage is to circulate draft timings for the services, but it takes British Rail some time to develop its proposals in such detail, and they were not available until September 1983. There is therefore not a great deal of time for further and detailed consultation before the timetable plans have to be firmed up by British Rail. However, suggestions come up as a result of that consultation and British Rail takes account of them. In the case of the 1984 timetable, I understand that a number of useful suggestions were made during the consultation and the original proposals were amended to take account of them. The reinstatement of one of the through services from Bromley north is an example of what can happen in this consultation process.
In view of the concern previously expressed about the arrangements for consultation and advance information about timetable changes, I undertook to draw British Rail's attention to this aspect of its service planning and

I wrote to the chairman of the British Railways Board about the issue on 6 February. My hon. Friend has himself raised the matter during Question time. Mr. Reid has replied to my letter and I would like to quote from the letter he has sent to me. I think it contains news that my hon. Friend will welcome. Mr. Reid explains, first that, in the light of the suggestions made in the House, British Rail has reviewed its procedures for discussing timetable changes with customers. He goes on to say:
In determining our arrangements for discussing timetable changes with our customers, we have, I believe, to draw a distinction between, on the one hand, detailed consultation in drawing up the plans with TUCCs, County Councils, and commuters' associations; and, on the other hand, once plans are broadly agreed, the briefing of MPs and the press on the policy issues and the key points of the changes proposed.
In this instance the extent of our detailed consultation is not in doubt . . . However our efforts subsequently, to brief and inform MPs and the wider public at large about the alterations and the reasons for them, appeared to have been less effective than in previous years . . . I am anxious to ensure that we ourselves give Members a better understanding in future.
I am sure we can with advantage do more to take the initiative in briefing Members at an earlier stage so they are properly equipped to deal with problems raised by their constituents. In future years, therefore, a summary of key timetable changes in the London and South East sector will be sent to MPs in the late Autumn of each year and there will then be opportunity to brief members more extensively on any areas which cause concern.
The letter continues, but in view of the lateness of the hour I shall not go through it all in detail but will send a copy of it to my hon. Friend and other hon. Members who have expressed worry to me about British Rail's practice in this area.
I hope that what I have said this morning, and what my hon. Friend has heard from British Rail at meetings about the 1984 timetable changes and in the latest letter which British Rail sent to him on 22 March explaining the proposals and illustrating how the adjustments in services are designed to improve the match between supply and demand, will at least give him some reassurance that he can pass on to his constituents.
In his statement in the board's 1983 annual report, which was published on 18 April, the British Rail chairman emphasised the need to satisfy the customer by giving value for money: by improving the match between supply and demand, to improve the efficiency of its operations, make room for improved standards of service and new investment, and reduce the cost to the taxpayer.
Substantial investment in the southern region is designed to improve services on the commuter network. Later this morning, I shall open an important new stage in the Brighton resignalling project at a total cost of about £120 million. Smaller scale investments take place all the time to improve information facilities for passengers, to improve standards of cleanliness on trains, and to carry out improvements to stations and station facilities. All this is very much in line with the strategic objectives which the Government set the Railways Board to provide services to customers which are reliable, attractive and punctual at acceptable fares and charges. Having said that, there are aspects of what my hon. Friend said which call to be brought to the attention of British Rail and I undertake to ensure that the chairman gets a copy of the report of this debate.

Question put and agreed to.

Adjourned accordingly at twenty nine minutes past Three o'clock am.